Corporate business law in Zimbabwe...
Fundamentals Level – Skills Module, Paper F4 (ZWE) Corporate and Business Law (Zimbabwe) 1
June 2008 Answers
Human rights are not conferred on people but belong to them by virtue of their being human beings. Part three of the Constitution of Zimbabwe seems to recognise this as it makes provisions for a host of justiciable human rights. It is therefore to be expected that any legislation to be enacted must not only uphold the rights set out in part three but also contain facilitative provisions for their realisation. (a)
The Right to Life – Section 12 Section 12 of the Constitution makes provision for the protection of the right to life – the most fundamental of all human rights. The right provided for is however, not absolute and of note is the fact that capital punishment is saved by the derogations contained in this section. Of note also is the fact that the state is allowed to take away life in circumstances that fall outside the infliction of punishment such as when effecting an arrest or dispersing unlawful gatherings. Statutory provisions have whittled down the right further. The law provides that capital punishment can be imposed for murder committed by a non pregnant person over the age of 18 and below 70 and committed in the absence of extenuating circumstances. Capital punishment can also be imposed in relation to treason. The judiciary has done nothing much to protect this right save to hand down deterrent sentences to those that are convicted of murder. Thus in Catholic Commission for Justice and Peace and Others v Attorney General and Others (CCJP) (1991), the court felt constrained to accept the constitutionality of the death penalty and only tried to find ways to ameliorate the negative effects of a position that it clearly did not agree with.
Provisions against Inhuman or Degrading Punishment – Section 15 In CCJP (supra) the Supreme Court expressed the view that ‘… s.15 stands as a sentinel over human misery, degradation and oppression’. The way the law has developed in this area shows co-operation between the executive and the judiciary in protecting this right. There have however, been exceptions. The current statutory position is that whipping in relation to adults is illegal as it constitutes a negation of this right. This was a result of the change brought about after a declaration to that effect by the Supreme Court in S v Ncube (1986). As relates to children, the position is different. In S v A Juvenile (1989) the Supreme Court had concluded that corporal punishment in relation to children was unconstitutional, only for Parliament to overturn that progressive decision by a constitutional amendment. Statute law thus currently recognises an inroad into this right and the law has lagged behind in that respect. Further, Zimbabwean statute law has no place for torture either as a form of punishment or of extracting confessions from accused persons. Thus a confession extracted by use of torture is inadmissible. It is also the position of the law that solitary confinement has no place in our system.
Deprivation of Property – Section 16 Private ownership is at the heart of any capitalistic society and our system is not different. This is why s.16 assumes an importance of significant proportions in our system especially in its protection of rights relating to private property. However, recently, the Constitution was amended to make land acquisitions non justiciable save for the issue of fair compensation. This has made serious inroads into s.16 and rendered it almost useless as it relates to land in that all agricultural land is now virtually under the state. Still on the land issue from 1997, the country witnessed unprecedented land invasions and occupations. Regrettably the government refused to observe court decisions obliging it to evict the illegal occupants – Commissioner of Police v Commercial Farmers Union (2002) and the resultant lawlessness that ensued at farms negated to the core the effect of s.16. The judiciary has however, on a balance stood as a bulwark against invasion of this right. In almost all land cases that went before the courts under former Chief Justice Gubbay, the right was upheld only for the executive to ignore the court decisions. Before disturbances on the farms, in Smith v Mutasa (1983) the court, though accepting the punishment meted out on the former colonial leader by Parliament, observed that he could not be lawfully deprived of his property in the form of a salary.
Freedom of Assembly – Section 21 The freedom of assembly just like the freedom of expression is at the core of any viable democracy – Rivett – Carnnac v Wiggins (1996). As assembly is related to expression, the fate of the two rights have not differed in practice. The Public Order and Security Act (POSA) 2000 regulates this particular freedom in a very stringent manner. Just like its predecessor, the Law and Order Maintenance Act, POSA has been used to curtail this right at the behest of the state. In terms of POSA, before people can gather for bona fide political activities, they have to notify the police. The police have interpreted it to mean that they should give consent and they have withheld it on numerous occasions. The police are given very wide powers to disperse a gathering which they feel is illegal and can use lethal force in doing so. They can impose bans in the holding of political rallies in certain police districts. The net effect is that people cannot gather in order to exercise their civil rights and liberties by and large. This is unnecessary and unjustifiable in any democratic society. It goes to the heart of s.21 and effectively erodes the right to assemble.
Freedom of Religion – Section 19 One of the most fundamental rights enshrined in the Constitution of Zimbabwe is that of freedom of religion. This right is provided for under s.19 which protects the freedom of conscience. By and large this particular freedom has been observed by both the executive and the courts. Zimbabwe has got a plethora of religious organisations practising different faiths, the most established ones being Christianity, African religions (both traditional and modern), Islam and to a lesser extent Judaism and Buddhism. To its credit, the state has tolerated even the most critical church denominations such as the Roman Catholic Church, which under the auspices of the Catholic Commission for Justice and Peace has on a number of occasions taken the Government to court and has been critical of a number of its policies. The Government has however, enacted laws which effectively seek to regulate some excesses of the less orthodox religions. In this regard, practices relating to child pledging, genital mutilation and human sacrifices have been proscribed. The courts have on their part emphatically stated that they will recognise any serious religion without delving into the validity of its beliefs or faith. This position was taken in In re Chikweche (1992) where a dreadlocked prospective legal practitioner had been refused registration by the High Court on the basis that his hair was unkempt. He had however, contended on his part that he was a serious devotee of the Rastafarian religion and could not shave off his hair to bring himself within the judge’s view of a person with properly kempt hair. The Supreme Court agreed with him and ordered his registration on the basis that the freedom of religion entitles one to observe his religion in the practice of his profession. It is fair to say that this is one constitutional human right which has not been interfered with by the state in any significant way.
There are several rules governing the award of damages in the law of contract. When damages are to be considered, whether due to delay or non-performance, no damages may be claimed without proof of breach. Thus mere delay does not entitle one to damages, but such delay must amount to mora which is a form of breach. Since the law does not concern itself with trivialities, damages will not be awarded in the most trifling of cases. The basic question is were the damages caused by the breach? (Shatz Investments (Pty) Ltd v Kalovyrnas.) This inquiry is the same as in the law of delict. There is a two stage inquiry (a) factual causation (b) legal causation. To establish factual causation, one must show that the breach was a sine qua non of the loss, i.e the but-for test, would the plaintiff have suffered loss but for the defendant’s breach? If not, the plaintiff’s claim fails and the second inquiry does not arise. If a plaintiff can show probability that he would not have suffered loss if the contract had properly been performed, he will succeed unless the defendant discharges the onus of proving that there was no such probability. Where the plaintiff succeeds in the but-for test, the legal causation question arises, i.e is the breach of contract linked sufficiently closely to the loss for legal liability to arise, or is it too remote? Damages for breach of contract are intended to put the plaintiff in the position he would have been in if the contract had been properly performed. In Zimbabwe the contemplation principle is used, United Charters v Jarman (1994), and the intention is to place a party in a position he would have been in had the contract been performed – Collective Self Finance Scheme v Asharia (2000). This is unlike delictual damages which are awarded to recompense the innocent party for his loss. The difference was stated in Trotman v Edwick (1951). ‘A litigant who sues on a contract sues to have his bargain or its equivalent in money or in money and in kind. The litigant who sues in delict sues to recover the loss which he has sustained because of the wrongful conduct of another. In other words that the amount by which his patrimony has been diminished by such conduct should be restored to him.’ Innes CJ added in Victoria Falls & Power Co Ltd v Consolidated Langlaagte Mines Ltd (1915) ‘The sufferer of such a breach should be placed in such a position he would have occupied had the contract been performed so far as that can be done by the payment of money and without undue hardship on the defaulting party.’ See also Holmedene Brickworks (Pty) Ltd v Roberts Construction Co Ltd (1977). Another question is, is the plaintiff entitled only to what he would have gained if the contract had been properly performed or to claim for expenditure he would not have incurred had the contract not been entered into? The answer is that it depends on the facts of the case as he sometimes may get either. This was the ruling in Mainline Carriers (Pty) Ltd v Jaad Inv CC (1998) arrived at by describing damages for breach as protecting the plaintiff’s expectation of interest, reliance interest or restitutionary interest. Expectation of interest is protected by putting the plaintiff in the position he would have been in if the contract had been properly performed. Reliance interest is protected by putting him in a position he would have been in if the pact was never signed and restitutionary interest is protected by cancellation and reciprocal restitution. It is thus the plaintiff’s election as was noted in Anglia Television Ltd v Reed (1971). In this case P entered into an agreement with D to make a television film. Before the start D repudiated the agreement. P could not as a result of the repudiation find a project to get into. The court decided that he was entitled to reimbursement of the expenses so far incurred but not for the profit expectations that he had. Courts are concerned solely with the plaintiff’s financial position and take no account of his injured feelings i.e patrimonial not sentimental loss. In Jockie v Meyer (1945), the court refused to extend the common law to allow contractual damages for any form of intangible loss, adding that such extension could only come from the legislature. In Administrator Natal v Edwards (1990) the court allowed damages for patrimonial loss but not for discomfort, pain and suffering and loss of amenities of life stating that these other damages could only be recovered in delict.
The same act may be both breach of contract and delictual and the rule is that a plaintiff must not be overcompensated hence care must be taken in ensuring that a claim under both heads does not lead to replication of damages. In Jockie v Meyer (1945), a Chinese merchant navy officer was refused damages for injured feelings on being turned away from a hotel in South Africa on racial grounds as he alleged only breach of contract. If damages were awarded for injuria upon claim only of breach of contract, this would be tantamount to awarding damages for sentimental loss instead of patrimonial or material loss in breach of contract cases. The rule is that damages will never be presumed, if the plaintiff proves none, none will be awarded Wheldon v Moldenhauer (1910). To ensure that undue hardship is not imposed on the defaulter, his liability is limited in terms of broad causation principles and remoteness to (a) those damages which flow naturally and generally from that kind of breach in question and which the law presumes the parties contemplated as a probable result of the breach; (b) on the other hand those damages, although caused by the breach, are ordinarily regarded by the law as too remote would not be recoverable unless the parties specifically or presumptively contemplated that they would result from the breach. Following breach, the plaintiff has a duty to mitigate his damages. This duty was well expressed in Haziz v TVL & Delagoa Bay Investments Co Ltd (1939), ‘This rule about mitigating damages relates not to what the claimant did in fact, but to what he should have done’. If the plaintiff neglects to do what a reasonable man would do if placed in his position i.e. fails to take reasonable steps to protect himself and defendant, then he would not be compensated for damages that would not have resulted had he been diligent – Reid v Hepker and Sons (1971). The plaintiff does not need to plead that he mitigated his loss and the onus is on defendant to prove that he has not. The plaintiff must not simply sit back and allow damages to multiply when with the exercise of reasonable prudence, this could have been avoided. At the same time, the plaintiff is not expected to take extraordinary or unreasonable steps in order to mitigate his damages. As the object for damages for breach is normally to place the innocent party in the position he would have been had there been performance, damages are generally calculated as at the time performance is due. The plaintiff must not be compensated twice for the same loss otherwise he becomes overcompensated. A plaintiff prevented by a defendant from doing work and earning reward cannot claim reward without doing the work as stated in Wifenburg Holdings v Bobroff (1970). In summation it can be said that the approach of the courts in awarding damages for breach of contract was succinctly formulated by the English courts in the case of Hadley v Baxendale (1854) as follows: ‘where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be supposed to have been in contemplation of both parties at the time they made the contract, as probable result of the breach of it ...’
Passing off is a form of deception which consists of taking unfair advantage of a reputation that another person has built. The delict is committed when the person passing off takes advantage of another’s reputation by misrepresenting intentionally or unintentionally to the public that his goods or services are that of his competitor. Loss or damage due to the erroneous belief must be suffered for the delict to be committed – Reckitt and Coleman v Boden Inc (1990). In order to prove that passing off has been committed, it is essential for the plaintiff to firstly prove goodwill or reputation in the goods or services. Goodwill was described in Tregd v Hunt (1986) as the whole advantage whatever it may be in connection with the plaintiff’s dealings. In IRC v Muler & Co’s Margerine Ltd (1901) it was described as the force that brings custom. If no goodwill exists, then there can be no passing off. Thus in Bon Marche v Brazier (1984) it was held that a supermarket with branches only in Harare and without any goodwill to protect in Bulawayo was not entitled to relief based on passing off in relation to complaints against a Bulawayo based competitor. Apart from the existence of goodwill there must be a material representation of a trade link in the goods or services. The essential concept of passing off is accordingly that goods or services tell a falsehood about themselves in a way calculated to cause deception. As held in Powell v Birmingham Vinegar Beverly Co (1997) and also in Zapchem Detergent Manufactures CC v Polaris Zimbabwe (Pvt) Ltd (2003), if there is no misrepresentation, there can be no passing off. Mere copying is however, not misrepresentation, there must be in existence something extra which suggests a business link for passing off to be committed. Thus as stated in Seybrook and Sayprint v Girdlestone (1986) the basic idea is just that a ‘trader’ should not make a false representation that his products or ideas are those of another. The law compensates damage for goodwill in the event of passing off being committed. In this regard, one does not need to prove actual damages by loss say of business but just a mere probability of harm in relation to goodwill as stated in HP Bulmer & Another v J Bolinger SA Champaign Lanson (1978). In the same vein, the deception pointed above does not have to be actual but the mere likelihood of its existence will suffice – Rixi Taxi Co-op v Mutigi & Others (1988). Finally the person who should possibly be deceived is the ordinary purchaser, that is one who answers to the reasonable man’s test – see F W Woolworth & Co (Zim) (Pvt) Ltd v The Store and Another (1998). Passing off takes several forms and a brief rundown of such forms seems to be in order. Firstly, it can take the form of direct statements that the merchandise or business of the defendant is that of the plaintiff. Secondly, it could be by use of a deceptively similar trade name to that of the plaintiff.
In Zambezi Conference of Seventh Day Adventists Church v Seventh Day Adventists Association of Southern Africa (2000) the court stated that a long established mother church was entitled to protection in so far as its name was concerned. In this case a break-away church had assumed a name which was distinctively similar to that of the mother church. This case also decided that passing off can be committed against a non-trading entity. It may also take the form of selling goods under a trade name already appropriated for goods of that kind by the plaintiff or under any name so similar thereto as to be mistaken for it. Thus in Zimbabwe Gelantine (Pvt) Ltd v Cairns Foods (Pvt) Ltd (2002) the respondent who produced dog food in pellet form under the name kibbles successfully got an interdict against the appellant who subsequently started to produce similar but cheaper dog food which it also described as kibbles. Finally selling goods with the trademark of the plaintiff or any deceptive imitation attendant thereto also constitutes passing off. The principle also covers cases in which the name of a genuine product has no geographical connotation but is distinctive or in which the defendant imitates the descriptive material which has become attached to the plaintiffs’ product by reason of an advertising campaign. In Seybrook and Seyprint v Girlestone (1986) an issue concerning the get up of certain skirts arose. The appellant who had obtained permission via franchise from the respondent to produce its unique wrap over skirts for sale abroad breached the agreement and started selling the skirts locally. The court found that as these skirts were virtually identical in everything, their sale locally amounted to passing off as they claimed by their very nature to be those of the respondent. In considering the remedies available for passing off it is important to understand the basis of the delict. The true basis for passing off is that it injures the plaintiff’s right of property in goodwill of his business. The action is thus not available to a member of the public who has been deceived but to a trader whose business goodwill has been, or is likely to be, harmed by public deception. In this light passing off thus entitles the plaintiff to an interdict or either damages or rendering of account. An interdict available in the face of the commission of this delict invariably assumes a prohibitory nature. It stops the defendant from engaging or continuing in any further activities which harms, the plaintiff’s interests. This is the relief that was granted in Zimbabwe Gelantine (Pvt) Ltd (supra) and in Zapchem Detergent Manufacturers CC (supra). The advantage of this relief lies in the measure of finality that it brings. Thus a trader who is passing off another’s products will be ordered to remove his own from the market. At his election, the plaintiff can also claim either damages or the rendering of an account. The commission of this delict necessarily leads the plaintiff into incurring losses. There is however, no need for the plaintiff to prove actual damages by loss of business, etc but the mere probability of harm suffices – HP Bulmer & Another (supra). A plaintiff may however, want to sue for actual gain accruing to the defendant. Under such circumstances he will get an order for the rendering of account. The position of the law is simply that the defendant has gained what was otherwise due to the plaintiff and must therefore reimburse him. It seems there is nothing in principle which stops a litigant who has obtained an interdict to subsequently sue for damages or the rendering of an account in appropriate circumstances. The above delict is conceived in the public interest as there is need to protect what persons and entities have built and consequently from which they should enjoy benefits. It however, does not go as far as encouraging monopoly in ideas and neither is it designed to stifle legitimate business competition.
Although a company has a separate legal personality (Salomon v Salomon (1871), it has no mind of its own and cannot transact its business by itself. It thus acts through the agency of some natural persons who are called directors and who are bound to it in a legal relationship. The directors run the company and are divided into executive and non-executive directors. They form the board of directors which is the controlling body of the company. Differences abound between executive and non-executive directors and below is a treatment of such differences. In addition to their basic role as directors, executive directors constitute the management of the company. An executive director is thus an officer of the company or an employee so to speak with a service contract and obliged to work full-time. In Stevenson Jordan and Harrison Ltd v McDonald & Evans (1952) it was pointed out that the contract for such a director is one of service and not for services, meaning that he is not an independent contractor. On the other hand non-executive directors do not form part of the management of a company. They only play a modest role in its activities which includes attending and voting at board meetings and any committees that may be established. They are not full-time employees, not servants of the company and do not have separate service contracts but their relationship with the company is only regulated by articles of association of the company. This position should however, not be overstated as in small private companies this distinction is blurred and at times even virtually non existent. It is normal for small private companies to only have in their ranks the mandatory two directors who virtually ‘own’ the enterprise. Both of the directors are normally the managers i.e are executive and one does not usually see non-executive directors in such concerns. The difference is however, properly maintained in big private companies and in public companies. Due to the above differences in involvement, non-executive directors are usually full-time employees elsewhere and only come to the company to perform their ad hoc tasks. As a result they rely heavily on the expertise and knowledge of executive directors, who are full-time employees and are acquainted with all the goings on. It is thus not an overstatement to say that in board meetings, executives probably have a larger say than non-executives except in exceptional circumstances. Non-executives only concentrate on broad issues such as the policy framework but the detailed implementation belongs to the executives. It should also be noted that as executives are engaged by the board, the non-executives have a say in the appointment of the executives but the reverse is not always true – see R v Mall & Others (1959). This is by virtue of the fact that the articles of
association make provisions for the appointment of all directors and it is under them that non-executives assume office. Thus there is this further distinction that all directors will invariably have a say in the appointment of executives but the reverse is not normally the case. A further difference comes in the area of remuneration. As the executives are virtually employees, they are entitled to be remunerated unless the articles or the separate contract under which they are engaged expressly provides to the contrary. Thus they are usually salaried employees, who are paid competitive salaries taking into account what other executives in other companies get. The non-executives do not on the other hand receive salaries but only fees. These fees are either a fixed annual sum or based on attendances and are as resolved by the company in a general meeting. This level of remuneration is consistent with their modest role. The only exception however, is that if the further duties of a director go outside these modest parameters, he is entitled to further fair and reasonable emoluments. Such further duties may be conferred upon him by the board of directors e.g consultancy work. The office of the executive director is also not a legal pre-requisite i.e it is not legally essential – R v Mall (supra). The position is not defined by law and is a question of fact i.e an evaluation of what the executive is and the functions he performs. On the other hand, it is mandatory to have non-executive directors by virtue of the fact that they are drawn from the collective board of directors which is itself a mandatory institution. Even if all the directors of a company are executive, they would have assumed their office by virtue of them having had been on the board in the first place. Thus one is a prerequisite for the other but the reverse is not always true. There is however, a downside to the above discussion which in its presented state mirrors the broad and rigid distinctions between the two groups. It appears the non-executive director of the modern company now undertakes considerably more detailed administration than his stereotype. This is seen more in that policies are now made and implemented at board level. The implementation part brings non-executives very close to the administration of the company. However, different cases will depend on different situations and in particular the provisions of the articles of association. The above constitutes a survey of the differences that exist between executive and non-executive directors. The differences are pronounced in practice but a lot depends on individual cases which include the size of the concern and the provisions of the companies’ governing instruments.
In summary, the duties of an employee are (i) to provide service (ii) to serve diligently and competently (iii) duty of subordination (iv) exercise good faith and to refrain from misconduct generally. These duties constitute the employment relationship and breach of such duties amounts to misconduct. The duties of an employee are clearly set out in the Labour Act (Chapter 28;07). (i)
Duty to Provide Service At common law, the worker has the duty to make his service available to the employer from the agreed time and in terms of the contract. An employee is supposed to report for work as provided by his contract. In s.4(e) of SI 15 of 2006, it is stipulated that an employee may be dismissed where there is ‘absence from work for a period of five or more working days without leave or a reasonable cause’. In Girjac Services (Pvt) Ltd v Mudzingwa (1999) an employee was arrested on charges of theft at the instance of his employer. He was released on bail but did not come back to work until 17 days later, he asked to be allowed to resume work but the employer refused the request. Some months later the employee was acquitted on the charges of theft although the circumstances of his acquittal did not establish his innocence. The employee sought to resume work and payment of wages from the date of arrest until the date of resumption of duty. The employer said that the contract had been repudiated by the employee’s absence. After fruitless negotiations the employee brought an action in the High Court seeking reinstatement. The court held that the employee was not entitled to absent himself from work because he had been arrested. He was not incapacitated from working and should have tendered his service. He could not blame his absence on his employer for having wrongfully caused his arrest since there was reasonable suspicion that he had committed an offence. However, there are circumstances when an employee is justified in refusing to render services, that is, where the employer fails to pay for services rendered or there is unlawful deduction on renumeration. In Mukandi & Ors v Hwedza Rural District Council (2004), the courts reversed the dismissal of employees who had gone on strike in protest against the non-payment of their backpay which the employer had diverted to other uses. Where there is an immediate occupational hazard threatening the health or safety of the employees, employees can justifiably refrain from providing services. In National Dairy Co-op v Chidziva (2004) where during the 1998 bread riots, workers could not get out of the company premises to collect milk from farms because of the riots and could not return in the evening for the same reasons, the dismissal of the chairperson of the workers committee was held unlawful.
Duty of Competence and Efficiency The worker has a duty to be reasonably efficient and competent at the commencement of the contract and throughout its duration, in other words not to be negligent. SI 15 of 2006, s.4(f) (g) (h) provides for this duty.
This duty has two main components and these are (I) the worker is supposed to be suited for the job and where the job requires qualifications, that the worker produces the qualification at the commencement of the employment contract. One should be able to perform to the level of which he is qualified. In Zimbabwe Mining and Smelting Co Ltd v Mafuka (1992) the court upheld the dismissal of a human resources manager who had failed to demonstrate his competence despite being given a number of chances. Once on the job the worker will exercise reasonable skill, diligence and perform his duties competently. This is provided for in s.4(c) (f ) (g) of SI 15 of 2006. In Quest Motor Corporation (Pvt) Ltd v Nyamukura (2000), a worker after 22 years in service failed to properly compute a warranty system under a new system resulting in losses to the employer, who then sought to recover damages on the basis of negligence. The court rejected this on the basis that the employee’s acts were due to incompetence arising out of lack of adequate training and supervision by the employer. (iii) Duty of Subordination This duty is provided for by s.4(b) of SI 15 of 2006. It has two components namely, that the worker must obey the lawful order given by employer and that the worker must be respectful to the employer and its business associates or customers. This duty of subordination has been held to be the hallmark of the employment relationship. In Matereke v CT Bowring and Associates (Pvt) Ltd (1987), it was held that for wilful disobedience of a lawful order given by the employer to justify summary dismissal of an employee in terms of the Labour Act, it must be such as to be likely to undermine the relationship between employer and employee, going to the root of the contract of employment. Knowledge, deliberateness and an intention to disobey must be present and the disobedience must be serious and not trivial. In this case, the action taken by the employee was deliberate and was persisted in not withstanding the warning given to him. He had taken the law into his own hands and by so doing he had put himself in the wrong. Wilful disobedience to lawful and reasonable orders and other forms of misconduct such as serious insubordination can threaten the smooth running of the enterprise and the employer is not obliged to wait until his business is adversely affected by the conduct of an employee before he moves to dismiss him. (iv) Duty of Good Faith An employee has the duty to work in and advance the interests of the employer and not against his interest. The employee is to refrain from misconduct or anything which makes the continuation of the employment relationship intolerable or unworkable or which undermines trust and confidence in employer and employee. The duty is mentioned in s.4(a) of SI 15 of 2006 namely that an employee shall not engage in ‘any conduct or omission inconsistent with the fulfillment of the express or implied condition of his employment’. This obligation is the cornerstone of the law of agency and the law enjoins the employee (agent) to exhibit utmost good faith. He should refrain from making a secret profit at the expense of the principal (his employer) and neither should the employee place himself in a situation of conflict of interest. In Tobacco Sales Floors Ltd v Chimwala (1987), the respondent had been employed as a floor manager in the appellant’s tobacco auction floors. While so employed he rehandled several bales of tobacco which had been sent for auction but which had been earlier rejected for sale. He then marked and resold the tobacco using the grower’s number of one farmer with whom he was in collusion. In so doing he deceived his employer, made a profit for which he should have accounted to the several growers involved and breached the law governing the auctioning of tobacco by using a grower’s number other than the number of the actual grower to sell the tobacco. The court noted that the respondent’s action had amounted to misconduct, inconsistent with the fulfillment of the expressed or implied condition of his contract of employment and the dismissal was therefore justified. (b)
There are various methods of termination of the employment relationship. The main methods of termination recognised by law are: (i) by notice (ii) cancellation for breach (iii) by mutual agreement (iv) by expiry of time or specified task (v) by supervening impossibility. (i)
Termination by Notice A permanent contract of employment may be terminated by either party on giving due notice. The principles governing fixed-term contracts are different. Such contracts cannot be terminated on notice unless it is expressly provided for in the contract itself. In Lever Brothers (PvT) Ltd v Marafuzah & Ors (1997), the court upheld the dismissal on notice of employees on a short term contract because the terms of the contract expressly provided that it may be so terminable. The giving of notice is a unilateral act which does not require acceptance or concurrence by the other party. The notice must be unequivocal and clear and may not be unilaterally withdrawn. Notice may be given at any time or day.
Termination for breach or repudiation The right to terminate the contract is available to either the employer or the employee where the other party is in material breach. If an employee breaches the contract of employment by conduct which amounts to fundamental breach, the employer is entitled to terminate the contract summarily and possibly to sue the employee for losses occasioned by the breach. In the case of Muchakata v Netherburn Mine (1996) the appellant was employed as a security sergeant at the mine by the respondent. Under him were a number of security guards. On a number of occasions, there were breaches of company rules by various employees. Following these incidents, the assistant personnel manager instructed the appellant to take disciplinary action against the employees concerned but he refused. It was held that what the appellant was being required to do what was not within the parameters of his contract of employment. The appellant’s willful disobedience to an unlawful order gave the respondent no right to dismiss him.
(iii) Termination by mutual agreement Despite the actual provisions of the contract on termination, the parties may mutually agree to terminate their contract. Agreement may be in writing or made orally. It should not be unilateral. In the case of Mushonga v NRZ (1986), it was held that where an employee renounces his obligation by tendering his resignation, an assertion that the contract was wrongfully terminated cannot be sound in law. Parties to a contract may at any time during the currency of the contract, mutually agree to terminate the contract. Such an agreement can override formal and substantive restrictions placed on the termination of the contract by the original contract itself. (iv) Termination by expiry of time or performance of task If a contract of employment is for a specified period of time or for a specific task, then such contract expires automatically at the end of the period or completion of the task. No notice or reason is required. In Chikinye & Ors v Peterhouse School (1999) the appellants were employed by the respondent school as teachers on short term contracts. Their task for which they had been employed ceased. They claimed to have been unfairly dismissed but the court could not agree with them. (v)
Termination because of supervening impossibility If either party to a contract becomes permanently unable to perform his obligations due to an exceptional and unforeseen happening (vis major), the other party is entitled to terminate the contract on grounds of non performance. In Baretta v Rhodesia Railways Ltd (1947), the contract was held to have been properly terminated by action of the state as a result of the Second World War, when an Italian employee was designated an enemy ‘alien’ and unable to lawfully work in the country. In City of Harare v Zimucha (1995), the respondent worked for the City of Harare as a fitter and turner from January 1984 until 4 May 1988. From that date he was absent as he was sick. The council knew he was sick and kept sending him medical forms to complete which he never did. He was summarily dismissed. The council claimed the return of the salary paid from 4 May 1988 on the grounds that it was not due and payable, as the respondent had been absent without authority because he did not apply for sick leave. It was held on appeal that the respondent did not have a ‘valid reason’ for his absence. If he was sick and wanted to go on being paid, he had to apply for sick leave. Without sick leave he was absent without leave. These are some of the major methods by which a contract of employment is terminated.
Section 169 (2) of the Companies Act (24;03) identifies the company secretary as an indispensable officer of the company. The same section stipulates that he should be ordinarily resident in Zimbabwe. The secretary is, unless the articles of association provides otherwise, appointed by the board of directors. The modern secretary unlike his old counterpart is not a mere servant of the company – Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd (1971), but is one of its officials. The duties of a secretary are not universal but he appears in every concern as the chief administrative officer. We turn now to consider the common duties of the company secretary. The secretary is responsible for keeping the statutory books, submitting the annual returns to the Registrar, and ensuring compliance with any various Administrative Regulations which may be made in terms of the Act. In this regard, the register of the members of the company, that of directors and officers of the company, the register of directors’ and officers’ interests, that of allotments, the one of debentures, if any, is available and the minute books of all the meetings fall under the custody and care of the secretary. The secretary also attends to the preparation of allotment letters, letters of regret and share certificates, option certificates and renounceable letters of allocation amongst others. This is done if there has been any rights offer or capitalisation issue. The duty to submit the annual returns is usually undertaken subject to the unavailability of an accountant who is answerable to the secretary. It clearly appears in this regard that the secretary ought to be knowledgeable in the law and meticulous in the execution of his duties. The other common duty of the secretary is linked to the public nature of his office in relation to the state. In this regard, he is usually seen as the public officer of the company in its dealings with the receiver of revenue and generally in all areas of intercourse between Government departments and the company. This function entails that he submits returns to the receiver of revenue for income tax purposes so that the company discharges its liabilities.
As relates to workers’ compensation schemes and insurance, the secretary is required to submit the necessary monthly and annual returns so that all the company’s employees remain covered. The duty to comply with the Labour Act in relation to the period of work of workers and their leave days is also reposed upon the company secretary. He thus constitutes the necessary link between the company and the outside world and has a supervisory role over the company and in its activities. Quite a sizeable part of the secretaries’ duties and responsibilities are concerned with the convening and holding of meetings such as board meetings, annual general meetings and some such meetings that should lawfully be held. As the chief administrative officer, the secretary draws up the agenda for the meetings and ensures that relevant reports and documents of reference are placed before the directors. The idea is simply that he has to see to the smooth running of the meeting. In notifying the concerned parties of the meeting it is his duty to see that all the necessary proxy forms are attached and after they have been completed see to it that they are duly completed and signed. At the meeting he ensures that the attendance register is signed by those in attendance or in the case of a general meeting he may arrange for admission cards to be collected at the door. Should there arise any area which needs clarification especially procedural and legal matters, he acts as the chairperson’s advisor during the meeting. The minuting of the proceedings is also his duty. Finally if any resolutions are made at the meeting it is his duty to see to it that there has been an implementation of those resolutions. As relates the running of the entity, the secretary is the senior administrative officer responsible for its smooth running in terms of the actual carrying out of the work. Basically the secretary ensures that adequate contact is maintained between the directors, executives on the one hand and employees on the other hand. As he is effectively the senior employee, he is required to communicate the board’s policy and instructions to the employees of the concern. As this is a two-way process, he is also obliged to communicate to the board the suggestions, comments and concerns of the employees. In general it is his function to ensure that the board’s policy is consistently and correctly implemented in every department of the business that is affected by such policy. Thus in small concerns, the secretary exercises a direct supervisory role in that regard. In larger entities, however, departmental heads can be appointed who in turn report to him. The secretary is thus normally an administrator responsible for ensuring that the everyday routine activities of the company are properly carried out. He effectively thus requires the characteristics expected of a manager and executive. In relation to the board, the secretary assumes the function of the right hand of the directors. This function is discharged in two major respects. In the first place, the secretary works effectively as a legal and financial advisor to the directors. As a secretary must be knowledgeable in the law, there are situations when that knowledge is required as when he has to remind the directors of their legal obligations or to warn them on the illegality of some proposed courses of action. He can also be called upon to provide ingenuous financial advice based on his knowledge of the way the concern or some other concerns in the same business are operating. In the second place the secretary also provides relevant information to management and the board on which wise decisions may be based. The board clearly has to be kept informed by an official who is always in touch with the activities of the business. Thus before any policy may be formulated or resolutions made, it is the duty of the secretary to bring the board’s attention to the information available to him which may tend to affect the decisions to be taken. The secretary’s failure in this regard entails grave consequences to the operations of the business. As relates to the company’s relations with the shareholders and the outside world generally, the secretary assumes the function of the company’s mouth piece. The secretary in this regard should seek to keep open the channels of communication between the board on the one hand and the company’s customers and shareholders, the investing public and the outside world in general on the other. He will keep in close touch with the more important institutional investors in his company and must be at all times conversant with the policy of the company on whose behalf he speaks. In all these areas, the secretary is the mouthpiece of the company both by word of mouth and also the written word in correspondence. The idea is to make it his unceasing aim to project and promote the most accurate and favourable image of his company so long as that lies in his power. The secretary has a host of other functions. It is his duty to comply with the legal requirements regarding directors, secretaries and auditors. It is also his duty to issue, transfer and to keep a record of shares and stock, the duty to arrange a public issue or offer for sale of shares and the duty to declare and pay dividends. The above constitutes a survey of the most common duties of the company secretary. It is perhaps important to conclude this discussion by tapping into the words of Nkala and Nyapadi in company law in Zimbabwe where the learned authors observe: ‘The work of a modern secretary of company today is administratively heavy and requires organising ability, good judgment and a considerable degree of tact in order to handle a variety of people he meets, as a secretary, in business and social contracts.’ In a nutshell, the secretary’s office is the nerve centre of the companies’ activities. (b)
A resolution is an expression of opinion or intention by a duly constituted meeting. In order for such an expression to become a resolution, it must be duly passed. Resolutions come in three types, namely ordinary, special and written. There are vast distinctions between these three types of resolutions.
Section 133(4) of the Company’s Act (Chapter 24:03) defines an ordinary resolution in negative terms and in contrast to special resolutions as follows: ‘All other resolutions at a general meeting shall be called ordinary resolutions.’ An ordinary resolution is accordingly a resolution of a general meeting that is not a special resolution. This primarily marks the major difference between these two resolutions. An ordinary resolution requires a simple majority of those voting in person or otherwise by proxy at a meeting at which due notice has been given. Such notice must specify that at the meeting it is proposed that a resolution will be passed and also the real substance of such a resolution otherwise such notice is void – MaConell v E. Prill & Co Ltd (1916). Section 127 (1) requires that at least 14 days notice in writing of the meeting at which such a resolution is to be passed must be given. The 14 day period relates to public companies and for private companies the period is seven days. Such a resolution is taken for all matters which do not require a special resolution. Such matters will be examined below. A special resolution is one which is passed in terms of s.133(1) of the Companies Act. It requires a majority of not less than three quarters of the members entitled to vote at a general meeting at which not less than 21 days notice specifying the intention to propose the resolution as a special resolution has been duly given – MaCowell (supra). Even if the notice referred to above has not been given, this resolution may still be passed in terms of s.133(3). This happens if there is an agreement by a majority together holding not less than 95% in nominal value of the shares giving the right. In terms of s.133(2) if the members present at the meeting hold less than a quarter of the total votes of all members entitled to vote, the meeting stands adjourned to a corresponding business day the following week. At the adjourned meeting the members present may, by a vote of not less than three-quarters of the available members, validly pass the resolution. From the above, it clearly appears that there are differences in the notice period and the number of members that may pass an ordinary resolution from those that may pass a special one. A special resolution is required for all matters so prescribed in the articles of association. In addition to those, it is also required under the following circumstances as prescribed by the Companies Act (Chapter 24:03): (i) (ii) (iii) (iv) (v) (vi) (vii) (viii)
for the alteration of the articles alteration of the memorandum of association alteration of the memorandum to alter the objects of the company alteration of the memorandum to vary the share structure investigation of the company’s affairs change of the company’s name arrangement with creditors in voluntary winding up and and in many other situations.
Nothing can happen in the above matters save by a special resolution. If any matter falls outside the above stated then an ordinary resolution would be competent to deal with such a matter. It is thus clear that for relatively unimportant matters an ordinary resolution should be utilised. Section 136 makes provision for further requirements attendant upon the making of a special resolution. As a special resolution is made in important matters that affect many people other then the company’s members, s.136 makes provision for the registration of such resolutions. In the absence of registration, the resolution is a nullity. Registration gives the other concerned parties the opportunity to inspect the resolutions made and thus take steps to protect their interests or simply for them to see how the company proposes to protect and promote those interests. These additional requirements are not provided for in relation to ordinary resolutions, which deal with routine matters which affect the company more than they affect the outside world. A written resolution on the other hand is made in terms of s.134. This resolution only applies to private companies and this represents the major difference between it and the other two types which are not limited in this regard. A written resolution is one that is in writing, signed by all members for the time being entitled to attend and vote on such a resolution at a general meeting. It is as valid and effective for all purposes as if the same had been passed at a general meeting of the company duly convened and held. The resolution is deemed to have been passed on the date on which the last member signs to signify his consent to its passing. By s.134(2) the resolution is not used to facilitate the removal of an auditor or director. This resolution is utilised in circumstances were there has been no general meeting but all those otherwise entitled to vote at a general meeting are in favour of the measure taken. This is very much unlike the other resolutions which are made at meetings. As it is of such a special nature, all the members have to agree to it for it to be effectual. This therefore raises the threshold of the members who should vote in its favour to a number higher than in the other resolutions as it requires everyone’s affirmative vote. To limit the possibility of abuse, its scope is by subsection 2 restricted, which too does not seem to be the case with other resolutions. The above constitutes a summary of the differences which exist between the above three types of resolutions.
In many jurisdictions, including Zimbabwe, corporate governance has in recent years firmly entrenched itself on the modern business agenda. Though appearing in somewhat different contexts and in different forms, it has successfully retained similar core issues – viz the need to achieve and maintain institutional progress and stability together with its attendant results. Corporate governance refers to the processes and structures by which a business and affairs of an entity are directed and managed in order to enhance shareholder value through enhancing performance and accountability whilst taking into account the interests of other stakeholders. Good corporate governance accordingly embodies performance ethics and accountability. The idea in part, stems from the principle of separate personality – Salomon v Salomon (1897). It is recognised that a corporation is an abstraction, has no mind of its own and is directed by someone, who assumes the status of an alter ego of its personality. It is when one considers the role of these human agents that the concept comes in handy and it focuses on policy direction and implementation. The Organisation of Economic Co-operation and Development (OECD) paper which encapsulates global principles defines corporate governance as encompassing a set of relations between a company’s management, its board, shareholders and other stakeholders. Corporate governance provides structures through which objectives are set and accomplished. It incentives and monitors how a corporation uses resources effectively. Corporate governance is not law, but some sort of soft law and best practices. It is recognised that business evolves faster than legislation hence the need for corporate governance. Corporate governance is prominent the world over and arose from titanic corporate failures that have affected many businesses. The Treadway and COSO reports seem to have given rise to the Cadbury Code, the leading light. This was followed by the sons of Cadbury who adapted and amplified the code and its provisions. More recently there has been the King 2 Reports in addition to other reports. Corporate governance has thus evolved as a global phenomenon, a reaction to misfortune coupled with the proactive spirit of preventing more massive business failures. As alluded to above, corporate governance was conceived to stop or at least minimise corporate failures. Indiscipline in Zimbabwe’s financial sector led to people suffering unimaginable financial losses as a result of corporate indiscipline at the turn of the current decade. On the global level, the case of the Enron Corporation, 2001 makes sad reading. Due to corporate indiscipline, when the corporation filed for bankruptcy, its stock closed at 72 cents down from more than $75 less than a year earlier causing unprecedented losses to the unsuspecting investing public. Equally devastating is the case involving Donald Black, the publishing mogul with interests in Canada, the USA, UK and Australia. The aims of corporate governance can be summarised as follows: increased benefit to stakeholders, sustainability and enhanced competitiveness of enterprises, increased capacity of corporation to attract investment, enhanced legitimacy, responsibility and responsiveness of the corporation and transparency, accountability and probity of corporation. The aims are naturally linked with the core pillars and the two inevitably complement each other. Thus the core pillars of good corporate governance are identified as fairness, accountability, responsibility, transparency, independence, social responsibility and discipline. These values represent best practices in the running of corporations. Guidelines on corporate governance underscore the principle that there should be a balance of power in boards. A board of directors should be well chosen and competent directors who are creative and innovative chosen. No one should have unfettered power and the activities of directors should be examined regularly. The board should also ensure that there is communication and that all communications to shareholders, employees and other stakeholders are made with accuracy and timeously. A look at these guidelines shows that a board which follows them will achieve the aims of corporate governance and address its core pillars. The Higgs report (UK) basically focuses on the role and effectiveness of non-executive directors. It advocates a two tier board system with the majority of the board being independent and non-executive. Non-executive board members also ought to have the relevant expertise. Clearly in such a situation accountability is ensured, decentralisation achieved and results brought to the corporation doorstep. The SA King II Report is primarily concerned with risk management. Responsibility is placed on the board to identify key risk areas of the business and is required to constantly monitor its key performance indicators. It is also obligated to disclose details of risk management strategies. The Australian Bosch Report also falls for consideration as its insights are apposite. The report lays that the company has to be properly managed to protect and enhance shareholder value and to meet obligations to stakeholders, the industry and the law. Non-executive members are obligated to provide independent advice to executive members. It advocates the separation of the roles of chief executive officer and chairperson of the board so as to avoid concentration of power in one person and thereby ensure greater output. One cannot overemphasise the centrality of the board of directors in matters pertaining to corporate governance. It is expected that directors be independent, trained, be competent and elected transparently. Various duties and obligations are cast upon directors from statute, common law and contract. The overriding theme in all these obligations and duties is that they should ultimately achieve the aims of corporate governance and give effect to its principles. In practice these values and best practices have been embraced in Zimbabwe. The company secretary plays a pivotal role in the corporate governance of a company. He provides guidance on ethics, good governance, responsibility and statutory duties. His office effectively monitors the whole establishment in order to ensure that the spirit of corporate governance is attained and consolidated. The directors are responsible for internal control in the spirit of the Turnball framework. They should maintain a sound system of internal control whose effectiveness is regularly reviewed.
In this light the role of auditors and accountants is important. This is a watchdog mechanism which ensures transparency, accountability and responsibility, in the achievement of corporate governance objectives. Finally, the directors, in line with their traditional duties will have to both report and disclose. The duty is also cast upon auditors and accountants. This enables the board to review its strategies, appraise same and also advance justifications on unclear issues. Disclosure will in particular minimise either the risk of fraud and other corrupt practices or the appearance thereof. In terms of our law, statute in the form of inter alia, the Companies Act (Chapter 24.03), Insolvency Act, and to some extent the Central Bank’s guidelines contain various provisions (some penal) for the enforcement of corporate governance. In this respect criminal liability attaches to directors in respect of breaches of the provisions of the Companies Act, which espouse corporate governance principles based on established legal principles. In terms of common law, liability might arise under the law of agency, since directors are basically agents of a company. Behaviour which constitutes a repudiation so to speak of the mandate necessarily attracts sanction. In the same vein delictual damages are availed for negligent performance of duty by the directors. With this in mind, directors become diligent and in the process uphold corporate governance. All in all, Zimbabwe has tried to adopt best practices on the theory and practice of corporate governance from other jurisdictions, particularly the developed economies of the western world.
An offer should be accompanied by animus contrahendi that is the serious intention to be bound contractually – Saambou – Nasionale Bouverenigin v Friedman (1979). An acceptance to be effectual has to comply with certain requirements and it is in that framework that we consider the various ‘acceptances’ presented in this case. The first issue concerns Themba’s acceptance to buy at $750,000·00 instead of the offered $1,000,000·00. For an acceptance to be valid it must follow the offer – Flashco (Pvt) Ltd v Fox and Carney (Pvt) Ltd (1979). Themba’s acceptance creates its own stipulations and can thus not be valid. Ngoni is thus not obliged to accept it as it goes outside his offer. It actually appears that Themba’s acceptance amounts to a counter offer. This is because it essentially calls upon Ngoni to revisit his offer and puts back the conclusion of the contract into his hands. The position of the law is that a counter offer terminates the first offer – Tinna v Hoffman & Co (1873). That being the case, Ngoni is not obliged to accept as no acceptance can validly be made, his offer having been effectively destroyed by the counter offer. As relates the Brinah acceptance, the position remains unaltered. It is quite clear that the offer was made to Themba and not to Brinah. It could only be accepted by the person to whom it was made – Hersch v Nel (1948). It is accordingly not competent for Brinah to intervene and force herself upon Ngoni’s offer because the offer was not made for her – Levin v Driepork Properties (Pty) Ltd (1975). The above position can only be altered if it appears from the particular circumstances of the case that the offeror intended that the above position would not apply – Blew v Snoxell (1931). It does not appear that there were any particular circumstances that envisaged a switch from the general position. Ngoni is thus entitled to reject Brinah’s acceptance as he has done. It should also be stated that it is immaterial that the acceptance purports to accept the offer as made. The point is simply that the acceptance has been made by the wrong person and consequently does not amount to an acceptance and the offeror is not bound to accept it. We turn now to the effect of Themba’s change of mind. The question to be considered is whether or not there is still an offer to be accepted under the circumstances. It having been established that Themba initially made a counter offer, the counter offer made had the effect of bringing the original offer to an end – Orien Investments (Pvt) Ltd v Ujamar Investment (Pvt) Ltd (1987). This is especially so because the counter offer was never accepted – Stephen v Pepler (1921). There is thus no scope for Themba to say he now wants to accept the offer at the terms proposed as there is no longer such an offer. Similarly Ngoni is no longer obliged to accept this present development. It should be noted however, that if he is still interested in selling, then he has to accept himself Themba’s offer for it is Themba who is now making an offer – Amalgamated Society of Woodworkers of SA v Schoeman (1952). Themba’s mode of acceptance also merits comment. If an offeror stipulates a method of acceptance, an acceptance of the offer can only be valid if it follows the stipulation – Laws v Rutherford (1924). Ngoni had made it clear that the acceptance has to be in writing. The stipulation is so intricately linked to the offer as to constitute a part of it – Levben Products (Pvt) Ltd v Alexander Filsm (SA) (Pvt) (1959). Thus even if the offer had still been standing, Ngoni would not be obliged to accept this verbal acceptance, which does not comply with the prescribed method of acceptance. To put it in different terms, Themba has not validly communicated his acceptance of the offer, as such communication has to be in writing. On the strength of Madan v Macedo Heirs (1991) there has been no valid communication of the acceptance of the offer and no contract can be concluded. Ngoni is thus not obliged to consider something which is not legally there, nor can he be called upon to accept same. The conclusion therefore seems irresistible that Ngoni cannot be tied to any one of the purported acceptances. They are legally not there, they are invalid.
The law of partnership in many respects involves an application of the law of agency – Divine Gates & Co v African Clothing Factory (1930). What should be determined in this case is whether or not Tunga met the requirements under agency and hence could bind the partnership. It seems he did and for that reason the judgment of the court is probably correct. A partnership does not have a separate legal existence/personality – Peacock v Marley (1923) the result of which is that each partner is held to be the other’s agent – Wolfshorn v Taylor (1928). It appears that this transaction was entered into in favour of the partnership and it is thus binding on the partnership and all the parties – Spark v Palte Ltd (1956). What a litigant who seeks to succeed in such matters must prove seems to have been proven in this case or was at least common cause. A litigant seeking to bind a partnership to what a partner has in his capacity as a partner done should first prove the existence of a partnership – Spark (supra). It seems that such existence is common cause and Tunga’s acts are binding. As laid down in Bain v Barclays Bank (1937), the partnership would still have been liable even if Tunga had no authority to borrow the money but had simply held himself to have such authority. A litigant also has to prove that the partner acted within the scope of his authority. Ordinarily a partner is held to have the authority to borrow money for use by the partnership. It appears that this money was in fact used for the ends of the partnership and on the authority of Cunningham & Co v Seale (1916) the partnership is liable. One could also say that Tymon by failing to dissociate himself earlier from the transaction conveyed the reasonable impression that he was in agreement with its terms. As observed in Henry v Annesley (1960), he cannot now seek to turn back from an impression freely conveyed by him. The plaintiff finally has to prove that the partner acted in his capacity as a partner and not for his own ends – Guardian Insurance Trust Co v Lovemore’s Executors (1887). It appears that Tunga did not only act in his capacity as a partner but also declared that capacity as he borrowed for the partnership – British South African Co v Mikellatos & Co (1912). There is clearly nothing which shows that Tunga entered into this transaction for his own ends. It is thus clear that the court was correct in reaching its conclusion. As stated in Mahomed v Karp Bros (1938), the basis of partnership is the share of profits, losses and one could add as well, liability. The partners should thus share the liability. On an ordinary application of the rules of agency, the partnership thus does not escape liability see Eaton and Louw v Arcade Properties (Pty) Ltd (1961). Also on the authority of Monzali v Smith (1929) one could also say Tymon is estopped from making a contrary contention. The finding of the court in Muller v Pienaar (1968) supports the foregoing. In that case a partnership had through the acts of one partner purchased some farm property, and that partner had signed the agreement of sale. The partner who had not signed the agreement then sought to avoid the contract claiming that the partnership was not bound by it. In rejecting that contention, the court observed that partners work on the basis of the law of agency and accordingly that transaction could not be avoided. In the circumstances the conclusion seems inescapable that the decision made by the court is correct.
The most important point in this regard is to note that this is an ordinary partnership and as such the liability of the parties is not only joint and several but also personal in appropriate circumstances – see Tucker and Another v Carrunthers (1941). The general position is that whilst a partnership exists, it and not the partners should be sued – Vulcan Trading Co (1955) (Pvt) Ltd v Ayliffe & Others (1969). It follows that whilst in existence, its property should be proceeded against first, before that of the individual parties is executed against. If the property of a partnership is insufficient, to satisfy the judgment, a party can proceed against the properties of the individual partners – Barker & Co v Blore (1918). This is what Kudzai seeks to do and there is no legal bar to that. This is by virtue of the fact that this is an ordinary partnership and the properties of the individual partners are executable under the circumstances – Lee v Maraisdrif (EDMS) Bpk (1976). As the partners are jointly and severally liable, it is appropriate to proceed against the property of one partner – Bester v Van Niekerk (1960). The partner who has had his property sold in execution will then recover the share by which the other partner was liable from that partner – see Robson v Theron (1978). In Shingadia Brothers v Shingadia (1957) it was held that it is that partner who has paid who should recover his share and not the partnership. It is thus Tymon in his personal capacity who will recover from Tunga his pro rata share. It is also important to note that this is a partnership debt and not a private debt. In other words, the debt was not incurred by Tunga in his name but that of the partnership. If the debt had been incurred in Tunga’s name, then it would be inappropriate to proceed against the partnership property and subsequently Tymon’s property. The general position explained above is therefore not changed and Tymon’s property is executable see Standard Bank of South Africa Ltd v Pearson & Another (1961). In the result the only conclusion which can be arrived at is that Tymon’s personal properties are executable.
10 The probable attitude of the court in the light of the facts of the case is that winding up can be secured on the basis of a number of grounds. The grounds upon which winding up can be done in this case are primarily based on s.206(f) as read with s.205 of the Companies Act (Chapter 24:03) and s. 206(g). According to s.205 as read with s.206(f) a company can be wound up by the court due to its inability to pay debts. It is quite clear that the company is unable to pay its debts within the meaning of the provisions of the Act. In terms of s.205(a) if upon demand, an amount of at least $100 000 is outstanding in three weeks or more in the absence of a lawful defence a case for inability to pay debts will have been made. In this case the company is unable to pay a debt of $2 million.
The other reason upon which winding up can be based is s.206(g), which says that a company may be wound up by the court if the court is of the opinion that it is just and equitable that the company should be wound up. The ‘just and equitable’ principle is by far the most popular reason for winding up a company. This is so because the ground covers a wide variety of situations and possibilities. Lord Wilberforce in the case of Ebrahimi v Westbourne Galleries and Others (1972) cited a number of cases which showed that the phrase ‘just and equitable’ is used in a wide variety of contexts. A situation which applies to this case relates to the disappearance of the substratum. The disappearance of the company’s substratum refers to a situation where a company has abandoned its main objects or where it cannot achieve them. In the Rhenosterkop Copper Company (1908) the substratum of a company which was formed to mine copper was held to have disappeared when it was discovered that there was no copper in the ground. Likewise, since the company’s sole factory is no more and there are no reasonable prospects of replacing it, since it was not insured, the substratum is gone and the company may be wound up. The prospects that the court will grant Shoko Enterprises (Pvt) Ltd’s petition for the compulsory winding up of Kufumaishungu (Pvt) Ltd in light of the facts of the case are quite high.
Fundamentals Level – Skills Module, Paper F4 (ZWE) Corporate and Business Law (Zimbabwe) 1
June 2008 Marking Scheme
In order to answer this question adequately, it is important for candidates to have a full appreciation of the fundamental rights enshrined in the Constitution and how the organs of the state have responded to them. 7–10 marks
Top band marks will be awarded to candidates who objectively and comprehensively outline the relevant fundamental rights and comment on whether or not such rights have been upheld in practice. It would be useful to cite practical examples and relevant case law authorities.
An answer which identifies properly the relevant rights but fails to make an in depth analysis of them.
A poor answer which fails to identify the relevant rights and is inadequate in its analysis.
For candidates to answer this question satisfactorily, it is imperative that they have an adequate understanding of damages as a form of remedy against breach of contract. The rules used in assessing, awarding and limiting of damages should be dealt with convincingly. 7–10 marks
Answers in this band will provide a full discussion of the area of the law, demonstrating an awareness of the circumstances under which damages are awarded. Citation of relevant case law is a must.
An answer which does not outline all the relevant rules and is thin in detail.
A rather incomplete answer which shows only a passing awareness of the subject matter.
This question simply requires the candidate to give a broad overview of the delict of passing off and the available remedies. It is critical for candidates to cite relevant authorities in order to answer the question satisfactorily. 7–10 marks
A comprehensive exposition of the delict of passing off which identifies relevant examples. Candidates should cite case law authorities because it is predominantly upon that basis that their understanding of the delict would be tested.
Answers in this band demonstrate a passing awareness of the delict but do not properly canvass and deal with the major issues involved.
A rather unsatisfactory answer which is thin in detail.
This question broadly demands that the candidates show an appreciation of the office of directors and consequently the differences that obtain between executive and non-executive directors. 7–10 marks
Answers in this band will show an appreciation of the office of directors, the divisions within that office and consequently the basis for these divisions. A fairly straightforward question which is not affected by the inclusion of authorities.
An answer which does not deal comprehensively with the issues.
Very little or limited knowledge of the office of directors.
These two questions pertain to employment law and requires the candidates to just list and explain (a) the duties of an employee and (b) the circumstances under which an employment contract comes to an end. (a)
Answers in this bracket should identify the major duties of an employee and explain the same. Inclusion of case law and statutory authorities is useful.
An indifferent answer in which the duties are either not adequately canvassed or understood.
A detailed answer which identifies and explains the ways in which a contract of employment terminates.
An unsatisfactory answer in which the methods of termination are not understood.
Answers in this band show an appreciation of firstly the office of the company secretary and consequently the duties reposed upon them. Candidates should make a detailed exposition of the most common duties of the secretary.
An inadequate answer in which the duties of the secretary are either not understood or are not exhaustively dealt with.
Answers in this mark range properly identify and deal with the provisions of ss.133–136 of the Companies Act (24:03). An indepth analysis of the differences that exist between the three types of resolutions is mandatory.
An indifferent answer which is grossly inadequate.
The question demands that candidates give an overview account of the concept of corporate governance. The concept should be adequately defined and its major component elements canvassed. 7–10 marks
Answers in this range comprehensively discuss the concept, its nature, purpose, how it operates and the rationale underpinning it. The citing of relevant practical examples is imperative.
Answers in this bracket may show a rudimentary appreciation of the subject matter but lacks the detail available in the answers which are in the higher bracket. Such answers may also deal only with the concept and omit relevant examples or vice versa.
At the lower end of the band, answers would show inadequate knowledge of the subject matter.
This question deals with broad aspects of contract law. In particular, it touches on offer and acceptance, in relation to who it is that can accept an offer, how it should be accepted, the effect of a counter offer and principles relating to termination of an offer. 7–10 marks
Answers in this mark range correctly identify the major legal principles in question and contain an analytical discussion of them. Citing of case law authorities is a must.
Answers in this range do not identify the major issues involved and contain a fairly weak analysis of the identified aspects.
An inadequate answer which does not identify the issues nor makes a detailed discussion of them.
A top range answer which identifies the fact that a partner in an ordinary partnership effectively assumes the position of an agent in relation to the partnership. Answers also show an awareness of the fact that it is competent to proceed against the properties of the individual partners if the partnership property has been exhausted.
A mild answer which does not adequately deal with issues involve.
An incomplete answer which is full of omissions and misses the legal points involved.
10 7–10 marks
A good answer in which candidates can show an appreciation of the fact that winding up of the company is likely to be granted on the basis of the company’s inability to pay debts. Mention should also be made of the just and equitable principle and citation of relevant case law is useful.
A rather lukewarm attempt which fails to make comment on the salient issues involved. Answers in this range also lack adequate case law authorities.
An inadequate answer.