Windhoek Renovations CC and Another v EVS Mining Contractors (Pty) Ltd (HC-MD-CIV-ACT-CON-2022/02451) [2024] NAHCMD 337 (21 June 2024)

REPUBLIC OF NAMIBIA

HIGH COURT OF NAMIBIA, MAIN DIVISION, WINDHOEK

RULING

Case No. HC-MD-CIV-ACT-CON-2022/02451

In the matter between:

EVS MINING CONTRACTORS (PTY) LTD 1^ST APPLICANT/1^ST DEFENDANT

MARTHA NELONGO MWANYENGWA 2^ND APPLICANT/2^ND DEFENDANT

and

WINDHOEK RENOVATIONS CC RESPONDENT/PLAINTIFF

Neutral Citation: Windhoek Renovations CC v EVS Mining Contractors (Pty) Ltd (HC-MD-CIV-ACT-CON-2022/02451) [2024] NAHCMD 337 (21 June 2024)

Coram: MASUKU J

Heard: Decided on the papers

Delivered: 21 June 2024

Flynote: Civil Procedure - Costs – Wasted costs – Section 364 of the Companies Act 28 of 2004 (‘the Act’) – To the effect that once the resolution to voluntarily wind up a company is taken, and duly registered with BIPA, legal proceedings are stayed – Vacation of trial dates and costs related thereto.

Summary: The plaintiff, Windhoek Renovations CC, a company duly incorporated in terms of the company laws of this Republic, sued the defendants, namely EVS Mining Contractors (Pty) Ltd and Ms Martha Nelago Mwanyengwa, for payment of the amount of N$3 085 895,95 for equipment and operators supplied by the plaintiff to the defendants. The defendants are sued jointly and severally for payment of the amount claimed, interest and costs. The matter was set down for trial on 6 May 2024 before this court. The second defendant appeared before court, and stated that she was never served with the summons. The second defendant is cited in her capacity as an executrix in the estate of her late husband, Mr Barnabas Uugwanga, who was a director of EVS Mining. The defendants, thereafter filed an application to vacate the trial dates on account of the fact that the directors of the first defendant, who included the second defendant, had passed a resolution for the winding up of the first defendant on the grounds that it was unable to pay its debts in terms of s 208 of the Companies Act 2004.

Held: The plaintiff should bear the blame because it does not appear to have served the second defendant with the summons in terms of the rules and there is in any event, no explanation as to why, if she had been properly served, no default judgment was moved against her.

Held that: Section 364 of the Act, makes provision to the effect that once a resolution to voluntarily wind up a company is taken, and duly registered with BIPA in terms of s 208 of the Act, the legal proceedings are stayed.

Held further that: It would be inappropriate to order the second defendant to pay any costs resulting from the vacation of the trial date. She has was not shown to have been in any way responsible for the trial not proceeding in the capacity in which she was cited. It would only yield unfairness to mulct her in costs in the circumstances.

Held: That the first defendant could not escape liability for wasted costs incurred by the plaintiff for the reason that it had participated in all previous case management hearings, including the roll call and never intimated at all, until after the trial was called, that it was in financial distress.

ORDER

1. The first defendant is ordered to pay the plaintiff’s wasted costs, consequent upon the vacation of the trial date in this matter.

2. Such costs are limited to costs of two (2) days and are consequent upon the employment of one instructing and one instructed legal practitioner but not subject to rule 32(11).

3. The matter is removed from the roll and is regarded as finalised.

RULING

______________________________________________________________________

MASUKU J:

Introduction

1. Costs are normally part and parcel of litigation. The court hardly issues an order on a matter serving before it without pronouncing an order relating to who, between or among the protagonists, should bear the burden relating to costs. There are, of course those rare cases where the court, for reasons articulated, will make no order as to costs, or will order each party to pay its own costs.

2. The primordial question for determination in this case is who, among the parties involved should, if at all appropriate, bear the costs of a trial that was vacated at the ‘twelfth hour’ so to speak and for reasons that will be articulated in due course.

3. In order to answer this question, it is imperative that the facts giving rise to the question for determination be traversed briefly for the reader to understand the context in which the question for determination arises. I do so briefly below.

Background

4. The plaintiff, Windhoek Renovations CC, a company duly incorporated in terms of the company laws of this Republic, sued the defendants, namely EVS Mining Contractors (Pty) Ltd and Ms Martha Nelago Mwanyengwa, for payment of the amount of N$3 085 895,95 for equipment and operators supplied by the plaintiff to the defendants. The defendants are sued jointly and severally for payment of the amount claimed, interest and costs. It is perhaps important to mention that Ms Mwanyengwa, is cited in her capacity as an executrix in the estate of her late husband, Mr Barnabas Uugwanga, who was a director of EVS Mining, referred to above.

5. The first defendant defended the action and to that end, filed a plea together with all the pleadings necessary for the matter to get ready for trial. On the date of trial, a twist took place. The second defendant entered the fray for the very first time and sought some time to engage the parties to seek a way forward.

6. Briefly stated, the second defendant’s position was that her husband succumbed to death and as a result, she was appointed by the officer of the Master of the High Court as an executrix, to wind up the estate of her late husband. It was, in this connection stated on affidavit that the executrix had not been served with combined summons in this matter. An application was thus made for the court to stand the matter down for the parties to map a way forward with the new developments in place.

7. The first and second defendants thereafter filed an application to vacate the trial dates on account of the fact that the directors of the first defendant, who included the second defendant, had passed a special resolution for the winding up of the first defendant in terms of s 354 of the Companies Act 2004, (‘the Act’).

8. In order to see the process through, there was a need for the special resolution winding up the first defendant in terms of s 354 of the Act, to be properly registered with the Business Intellectual Property Authority in terms of 208 of the Act. The matter was thus postponed to allow for that process to be followed through, inevitably resulting in the trial being vacated for the developments mentioned above.

9. The plaintiff appears to have accepted that the trial could not, in the circumstances proceed although it did its best to ensure that the trial commenced in earnest. The court, appreciating the new developments, and considering the provisions of s 364 of the Act, to the effect that once the special resolution to voluntarily wind up a company is taken, and duly registered with BIPA in terms of s 208, the proceedings are stayed, the question of who if at all, should bear the plaintiff’s costs thus loomed large. It is that question that the court will answer in this ruling.

10. I acknowledge that in the interlocutory application, the defendants are cited as the applicants and the plaintiff, is cited as the respondent. For ease of reference, the parties will be referred to in this ruling, as they appear in the main action.

11. For the sake of completeness, it necessary to state the representation of the parties in this matter. The plaintiff, was represented by Ms Ihalwa, whereas Ms Fernandes represented the first defendant. Mr Tjombe belatedly represented the second defendant. The court records its indebtedness to all counsel for the assistance they rendered to the court.

The parties’ submissions

12. The defendants both take the position that no costs should be levied at all in this matter, in light of the events that occurred necessitating the postponement of the matter. They argue that the plaintiff should bear the costs for it unreasonably and unjustifiably resisted the vacation of trial dates when the circumstances clearly indicated or suggested that vacating the trial dates was the only viable option. I will commence with Mr Tjombe’s submissions.

13. He argued that the second defendant had not been served with the summons as required by the rules of court. In this regard, he further argued, the second defendant was not aware of the proceedings until the eve of the trial and as such, it would have been impractical for the trial to proceed in circumstances where one party was not served with the papers.

14. Mr Tjombe further argued that the financial situation of the first defendant has now been exposed and that in the circumstances, it would be reckless for the case to proceed with the first plaintiff in financial ruin. More importantly, it was submitted for the second defendant that the defendants could not, in good conscience, tender any costs for the vacation of trial, proper regard had to first defendant’s precarious financial situation. It was further submitted that the plaintiff is not without a remedy as it could pursue its claim with the liquidator once appointed in terms of the company laws.

15. Finally, it was argued that the respondent’s insistence on continuing with the trial after the first plaintiff’s financial situation had been disclosed, was unreasonable and that this warranted a costs order to be issued against the plaintiff.

16. Ms Fernandes for the first plaintiff also argued that the second defendant had not been served with the combined summons. As such, she did not file any papers in her defence, including witness’ statements. It was her case that the court could not have properly proceeded with the trial, given the precarious financial circumstances of the first plaintiff. As such, the court could not proceed with the trial, where it was plain that the first applicant had not been served with the summons.

17. Regarding the vacation of the trial and the costs theretoanent, it was submitted on behalf of the first plaintiff that the resolution filed for the winding up of the first defendant amply demonstrates that the first defendant is in a weak financial position and that it would amount to reckless trading to proceed with the trial in the circumstances. It would therefore be in the best interests of the company not to proceed with the action as to do otherwise, would unnecessarily increase costs and eventuality the first defendant can ill-afford. The plaintiff’s insistence with the trial proceeding, so submitted Ms Fernandez, was oppressive and unreasonable and that the court should mark its disapproval by mulcting the plaintiff in costs.

18. She argued further that in any event, once the resolution is registered with BIPA, the provisions of s 208 of the Act then kick in, meaning that the litigation is suspended. Continuing with litigation in the circumstances, would be a violation of the prohibition against reckless trading, it was further submitted and which had the potential to place the defendants on a collision course with the law, as dire consequences may result from proceeding with the trial.

19. Ms Ihalwa, for the plaintiff submitted contrariwise. It was her argument that the first defendant had participated in the proceedings up to trial. In this wise, it recorded its readiness to proceed with the trial on Friday 3 May 2024. It was submitted that once the trial had to begin, the defendants devised a plan to abort the trial. It is then that they hurriedly made the resolution to wind-up the company, although they had been aware of the entity’s precarious financial position since 2021.

20. It was argued, in this regard, that the second defendant, as a director of the first defendant, was or must have been aware of the first plaintiff’s ruinous financial position. Furthermore, the first plaintiff conducted its defence well aware of its precarious financial position but nonetheless proceeded with defending the matter right up to when witnesses were supposed to be called to testify. It was the applicant’s case that it was not actuated by bad faith in opposing the application for vacation of trial dates in the circumstances. Ms Ihalwa submitted that all said and done, the respondent is entitled to be granted its costs for the vacation of trial, not limited to rule 32(11).

21. Having briefly dealt with the submissions and positions of the respective parties, it is now appropriate to determine the application by pronouncing on who, if at all, is entitled to pay or to receive costs, if any. In dealing with that issue, it is important in my considered view, to deal with the parties according to their respective peculiar positions in this matter. I propose to first deal with the second plaintiff, because I believe that her position is different and deserves to be treated with that understanding.

Costs relating to the second defendant

22. It is plain from reading the papers filed of record that the second defendant was not served with the papers in this matter. There is no record of proceedings on record evidencing that she was served. In this regard, it is also worth noting that there was no intention to defend filed by her as a result. Consequently there was no plea and further pleadings filed on her behalf. She was as good as being no party to the proceedings. This did not, however, mean that she could relax and take no steps once she learned that the trial was on course the following day.

23. The plaintiff alleges that the second defendant was served with the summons as same was served on her agent, Messrs Samuel & Company. That return of service, is not before court. Whatever is said in relation to the said legal practitioners, is hearsay, as correctly pointed out by Mr Tjombe. The long and short of it, is that there is no evidence before court that the second defendant was served, nor is there any indication that she had authorised the said legal practitioners to receive service on her behalf.

24. In any event, it needs to be pointed out that the process involved and which was to be served on the second defendant, initiated the action proceedings. For that matter, the process had to be served on the second defendant herself. This is what the rules of court provide for. Only in the event where personal service cannot be effected can service in other manners stated in the rules, be followed. There is no explanation by the deputy sheriff in this matter as to how service was effected on the second defendant. This is so because the return of service is starkly missing from the papers.

25. Another issue worth considering, is that the second defendant was not met with any application for default judgment, which should have been the natural consequence of her not defending the proceedings. There is no explanation why this step, which is very easy and convenient and lends to clarity at the time of trial, was not pursued by the plaintiff. This, in my considered view, together with the other considerations above, point inexorably in the direction that the second defendant was well within her rights to make the application she did and when she did as there is no admissible evidence to gainsay her version as to how and when she got to learn that the trial was set to commence.

26. I accordingly find that it would be inappropriate to order the second defendant to pay any costs resulting from the vacation of the trial date. She has not been shown to have been in any way responsible for the trial not proceeding in the capacity in which she was cited. It would only yield unfairness to mulct her in costs in the circumstances. I accordingly decline to issue a costs order against her. If anything, the plaintiff should bear the blame because it does not appear to have served her with the summons in terms of the rules and there is in any event, no explanation as to why, if she had been properly served, no return of service was filed. Furthermore, no default judgment was moved against her. These omissions reinforce her case.

Costs relating to the first defendant

27. The first defendant, however, stands in a different position in my estimation. It participated in the entire pre-trial procedures up to and including the setting down of the matter for trial. I am of the considered view that it should have acted proactively well before the trial and should have alerted the plaintiff or taken the steps to move for voluntary liquidation in good time – well before the matter was set down for trial.

28. In this regard, it is fitting to note that on the Friday before the commencement of the trial, ie on 3 May 2024, the first defendant, duly represented by its legal practitioners, appeared before court and expressed readiness to proceed to trial. The issue of the financial position of the first defendant was not mentioned at all and the judge and the parties spent the weekend preparing for a trial that over a few days could no longer proceed.

29. I do not question the bona fides of the first defendant regarding its financial situation. It is rather the timing of issues relating thereto that is of concern to the court. Had the issue of its financial situation been disclosed in good time, the plaintiff may have been properly advised and in good time as to the appropriate route to pursue so that good money is not thrown after bad. The vacation of the trial was clearly avoidable. The court and the other parties would have been informed as soon as the first defendant’s financial position became apparent, with a view to halt the proceedings and to pursue the liquidation route in good time. In this regard, other cases may have been placed on the roll for hearing, thus maximising the court’s time and resources.

30. The first defendant’s failure to do so, in my view, leaves the court in a position where it cannot do otherwise than to order the first defendant to pay the wasted costs occasioned by the vacation of the trial. I do so quite alive to the effect of s 208 of the Act on legal proceedings once a winding-up resolution has been passed. The matter at hand deals with the situation before the issue of the s 208 of the Act comes into play. It relates to the first defendant’s failure to take appropriate precautionary steps timeously to halt the proceedings before costs could be incurred by the plaintiff.

31. Having said this, it must be mentioned that costs are granted subject to the court’s discretion. In the instant matter, it seems fair that the days in respect of which the plaintiff would be entitled to claim the costs be limited. In this connection, it would be fair and just if the plaintiff will be entitled to wasted costs for two (2) days.

Order

32. In the premises, and for the reasons stated above, it seems to me that the following order should be issued, namely:

1. The first defendant is ordered to pay the plaintiff’s wasted costs, consequent upon the vacation of the trial date in this matter.

2. Such costs are limited to costs of two (2) days and are consequent upon the employment of one instructing and one instructed legal practitioner but not subject to rule 32(11).

3. The matter is removed from the roll and is regarded as finalised.

____________

T.S Masuku

Judge

APPEARANCES:

1^ST APPLICANT: F Fernandes

Of Shikongo Law Chambers, Windhoek

2^ND APPLICANT N Tjombe

Of Tjombe-Elago Law Firm, Windhoek

RESPONDENT L Ihalwa

Instructed by: BD Basson Inc., Windhoek.