The High Court has dismissed an application by the Zimbabwe Diamond and Allied Minerals Workers Union (ZDAMWU) and two employees to place mining giant RioZim Limited under corporate rescue, ruling that the union lacked the legal standing to bring the case, Mining Zimbabwe can report.
By Rudairo Mapuranga
In a judgment delivered by Justice Mandaza, the court upheld a preliminary objection by RioZim, finding that ZDAMWU did not qualify as an “affected person” entitled to initiate such proceedings under the Insolvency Act. The decision halts, for now, a high-stakes legal attempt to force the troubled miner into a supervised rescue process. Notably, the court ordered each party to bear its own costs.
What is Corporate Rescue?
Corporate rescue is a legal process introduced in 2018 to replace the older judicial management system. It is designed to rehabilitate a financially distressed company by placing it under the temporary supervision of a practitioner. The goal is to develop and implement a plan to save the business, preserve jobs, and maximise returns for all stakeholders, while imposing a temporary moratorium on claims from creditors.
The Union’s Case and RioZim’s Defence
The applicants, ZDAMWU, an employee from Renco Mine, and a former employee from Kadoma, argued that RioZim was in “financial distress.” They pointed to alleged liabilities exceeding assets, adverse audit opinions, and the tragic death of a major shareholder as factors necessitating rescue to protect jobs and the company’s assets.
RioZim opposed the application vigorously, raising several technical objections. Its most successful argument was that ZDAMWU had no locus standi (legal right to sue). The company contended that while ZDAMWU is a registered trade union in the mining industry, the Insolvency Act specifically requires the applicant to be a union “representing employees of the company.”
The Court’s Reasoning: Why the Union Failed the “Busybody” Test
Justice Mandaza’s judgment centred on this point of standing. The court explained that to have locus standi, a party must show a direct, substantial, and legally recognised interest in the matter. It cited the classic distinction between a person with a genuine stake and a “busybody” who meddles without legitimate concern.
Crucially, the court referred to a Supreme Court precedent (Metallon Gold Zimbabwe v Shatirwa Investments). In that case, it was held that the Act does not provide for “a registered trade union in the industry,” but specifically for one “representing employees of the company.”
The court found that ZDAMWU, registered for the broader diamond and mining industry, did not meet this precise statutory definition for the purposes of an application against RioZim. “The first applicant is just a ‘busybody’ in the strictest sense of the word. It has no direct and substantial interest in the matter,” Justice Mandaza stated.
Consequently, the application was dismissed at this preliminary stage, without the court needing to delve into the detailed merits of RioZim’s financial health or the other technical disputes about board resolutions and affidavits.
Other Legal Arguments Briefly Addressed
The judgment also swiftly disposed of other technical points raised by the applicants:
Invalid Board Resolution: The court rejected the claim that RioZim’s board resolution authorising its defence was invalid, finding it met basic legal thresholds.
Approbation and Reprobation: The court dismissed the argument that RioZim was trying to “have its cake and eat it” by allegedly approving rescue in one context but opposing it here. The judge found RioZim had consistently opposed being placed under rescue.
Statutory Bar: The court clarified that the moratorium on legal proceedings (Section 126 of the Act) only takes effect after a company is placed under rescue, not before. Therefore, RioZim was fully entitled to defend itself against the application.
Outcome and Costs
The application was dismissed. On costs, RioZim had sought punitive costs, but Justice Mandaza ruled that each party should bear its own costs. The court reasoned that the case raised important legal issues and was not frivolous, vexatious, or an abuse of process; it was simply brought by a party without the required legal standing. Costs, the judge noted, should not be a deterrent to accessing justice in such circumstances.
Implications of the Judgment
The ruling reinforces a strict, formal interpretation of who can initiate corporate rescue proceedings. It underscores that a general industry union cannot automatically act for employees of a specific company under the Insolvency Act unless it is formally recognised as representing that company’s workforce. For employees seeking to place their employer under rescue, the path likely requires either a direct application by a sufficient number of them or action through a union specifically mandated for that company.
RioZim, for now, continues to operate outside the court-supervised rescue process. The judgment leaves open the possibility of a future application by a party with clear standing, should the company’s financial situation provoke further legal action.
