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Judgment

8 HH166-25 HCH 320/25 PACIFIC CIGARETTES COMPANY (PVT) LTD (under corporate rescue proceedings) versus THE ZIMBABWE REVENUE AUTHORITY and THE MASTER OF THE HIGH COURT HIGH COURT OF ZIMBABWE MANDAZA J HARARE, 13 February 2025 & 20 February 2025 Urgent Court Application E Mubaiwa, for the applicant S Banda with K Manyika, for the first respondent No appearance for the second respondent MANDAZA J: On 24 January 2025, the applicant filed an urgent chamber application for a declarator and consequential relief in terms of rule 59(6) of the High Court Rules, 2021. After hearing submissions from counsel for the parties on the merits on 20 February 2025, I issued the following order: “WHEREUPON, after reading documents filed of record and hearing counsel IT IS ORDERED THAT: The application be and is hereby granted with costs. It is declared that during the tenure of corporate rescue proceedings the First Respondent cannot directly or indirectly enforce payment of tax debts that arose prior to commencement of corporate rescue proceedings except, in terms of the provisions of Part XXIII of the Insolvency Act [Chapter 6:07]. Consequent to paragraph 2 above, the First Respondent should issue to the Applicant Tax Clearance Certificates during the tenure of the corporate rescue proceedings, provided the Applicant has complied with its tax obligations that arose during the corporate rescue process or has made suitable arrangements with the First Respondent for discharging such obligations.” The first respondent has requested that I furnish reasons for the judgment, indicating an intention to note an appeal against the judgment. These are the reasons. FACTUAL BACKGROUND The applicant is a company duly incorporated in terms of the Companies and Other Businesses Act [Chapter 24:31]. The first respondent is an administrative authority responsible for the collection of taxes and is established in terms of the Revenue Authority Act [Chapter 23:11] (“the Revenue Authority Act”). The applicant was placed under corporate rescue in terms of the Insolvency Act [Chapter 6:07] and as a consequence, its affairs fall entirely under the administration of a Corporate Rescue Practitioner (CRP). The applicant is suing the first respondent to compel it to issue a tax clearance certificate (TCC). It is the applicant’s contention that a valid TCC is required to enable it to properly conduct business. As already noted, the applicant is operating under corporate rescue in terms of the Insolvency Act. Its affairs are administered by a corporate rescue practitioner, who deposed to an affidavit on its behalf. The applicant fears that if it fails to obtain a valid TCC, its business operations will be prejudiced. In this regard, the applicant pleads that a valid TCC is required for several operations and regulatory requirements. To it, a TCC is a precondition for licensing, imports and exports, and that the absence of a TCC will hinder its various operations and interactions with various government agencies and regulators. Briefly, the background events on which the applicant’s cause of action is founded is that in January 2025, following an application for a TCC, the applicant was advised by the first respondent’s liaison officer that a TCC could not be issued as it had an outstanding balance of ZWG 1 million on current obligations and other tax obligations in excess of US$19 million. Accordingly, the applicant paid the amount of ZWG 1 million representing its current tax obligations. It is the applicant’s case that by 3 January 2025 its tax account was up to date on all current obligations. The applicant then followed up with the first respondent’s liaison officer for the issuance of a TCC. The applicant was advised that its application for a TCC was being declined due to its outstanding tax obligations. In response, the applicant was of the view that the corporate rescue plan, which had been approved following a meeting with its creditors held in 2024, incorporated its outstanding tax obligations. Accordingly, the aforementioned that tax obligations would be paid in accordance with the corporate rescue plan. The basis of the applicant’s reference to the corporate rescue plan was that the first respondent was part of the creditors who attended and voted at the creditors’ meeting at which the corporate rescue plan was drawn up. The applicant also contended with the first respondent’s officials that the refusal of a TCC would amount to an enforcement action that is prohibited under section 126 of the Insolvency Act and would have the effect of defeating the corporate rescue plan binding upon all creditors, including the first respondent. In response, the first respondent questioned the basis upon which the applicant had claimed to be exempted from satisfying its outstanding tax obligations on the basis of the corporate rescue proceedings under which it had been placed. It is important to reproduce a part of the letter authored by officials of the first respondent in terms of which it was clear that the first respondent would not issue the TCC. The relevant part of the letter stated: “I recognise that while Section 126 of the Insolvency Act suspends the recovery processes, it does not guarantee the issuance of a Tax Clearance Certificate (TCC). Furthermore, there is a question as to whether the provisions of the Insolvency Act, including section 126, supersede the provisions of Statutes administered by ZIMRA, especially where nothing in the Insolvency Act has overriding effect. Some laws are clear that they have an overriding effect and that they would have clauses which say that notwithstanding what any other statute says. An example is Section 58 subsection 1 of the Income Tax Act which say, “The Commissioner may, if he thinks necessary, declare any person to be an agent of any other person, and the person so declared an agent shall be the agent of such other person for the purposes of this Act, and, notwithstanding anything to the contrary contained in any other law, may be required to pay any tax due from the moneys in the current account, deposit account, fixed deposit account or savings account, or from any other moneys, including pensions, salary, wages or any other remuneration, which may be held by him, or due by him to, the person whose agent he has been declared to be.” In any case, section 126(1)(f) of the Insolvency Act seems to provide aus with leeway to just advise you what we intend to do implying that we can follow up on any assessed tax.” The first respondent had made its position clear. Taking into account the provisions of the Insolvency Act, the applicant was of the view that the first respondent has no power to decline a TCC in terms of the Revenue Authority Act [Chapter 23:11] on the basis that there is no satisfactory arrangement to settle a debt that arose before the commencement of the corporate rescue proceedings, or on any other basis, and any other enforcement mechanisms for such debts are suspended by operation of law during the corporate rescue proceedings. Convinced of its rights under the Insolvency Act, the applicant filed this urgent chamber application to vindicate its business interests following the refusal to issue a TCC by the first respondent. The applicant sought relief in the following terms: “IT IS ORDERED THAT: The Application be and is hereby granted with costs. It is declared that, during the tenure of corporate rescue proceedings, the First Respondent cannot directly or indirectly enforce payment of tax debts, that arose prior to commencement of corporate rescue proceedings, except in terms of the provisions of the Part XXIII of the Insolvency Act (Chapter 6:07). Consequent to paragraph 2 above, the First Respondent should issue to the Applicant Tax Clearance Certificates during the tenure of corporate rescue proceedings.” Only the first respondent opposed the application. The first respondent’s key contention was that no satisfactory arrangements had been made to date for the payment of the outstanding tax obligations owed to it by the applicant. Accordingly, the first respondent found no basis upon which it could lawfully issue a TCC to the applicant. It is important to also observe that in its opposing affidavit, the first respondent raised several preliminary points. First, it argued that the matter was not urgent. Second, it contended that the applicant’s draft order was incompetent, as the third paragraph purported to seek an unconditional and perpetual right to the issuance of a TCC for the entire duration of the corporate rescue proceedings. When the papers were placed before me by the registrar, I directed the parties to attend a chamber hearing on an urgent basis. At the hearing, the first respondent raised two preliminary issues. The first was that the matter lacked urgency, as the alleged urgency was self-created by the applicant. The second, as noted in the first respondent’s opposing papers, was that the relief sought was incompetent. For completeness, I reserved judgment after hearing submissions on those issues and later dismissed them for lack of merit. The judgment of this court regarding the procedural points was issued under judgment number HH99/25. The registrar was thereafter ordered to re-enrol this matter for hearing on the merits on an urgent basis. These reasons now address the parties’ submissions on the merits of the applicant’s claim. SUBMISSIONS BEFORE THIS COURT At the hearing, Mr Mubaiwa¸for the applicant, submitted as a preliminary point that they were seeking an amendment of the Draft Order, specifically to para 3. Mr Banda was not opposed to the amendment. On the merits, counsel for the applicant submitted that the matter before the court was not a tax dispute but rather an insolvency law dispute and as such did not invite the application of tax law statutes. It was his submission that the issue of taxation was only relevant to one of the sources of insolvency. He argued that the first respondent, as part of or an arm of the State, was not entitled to hide behind public law in order to escape obligation from its participation in private law contracts. He further argued that the Tax Bill, which the first respondent relied on to refuse Tax Clearance Certificates, was part of the Corporate Rescue (CR) process. It was Mr Mubaiwa’s submission that under the CR Process, the Corporate Rescue Practitioner (CPR) of the creditors met as an assembly and voted for the CPR Plan and that the circumstance or vote or approval of the plan was a compromise agreement binding on every creditor that took part in the vote. For this proposition, he relied on the cases of Metallon Gold Zimbabwe (Private) Limited & Ors v Shatirwa Investments (Private) Limited & Ors SC 107-21 and Minister of Justice, Legal & Parliamentary Affairs v Muskwe & Ors SC 67-22. Mr Mubaiwa also placed reliance on the judgment of Buwu & Anor v Village Inn PL & Ors SC 112-23 to argue the legal effect of a scheme of arrangement under s 191 of the repealed Companies Act. He submitted that in the Buwu case the court ordered that there be a scheme arrangement and the creditors met and agreed on how the liabilities would be managed and the scheme was to be registered with the Registrar of Companies. He further submitted that such an agreement created a contract binding between the company and all the creditors that partook in the scheme and a party was therefore not entitled to proceed contrary to that scheme of arrangement. Counsel thus argued that the same principle applied in this matter as there was a contract involving the applicant and the first respondent bearing on how financial obligations were to be discharged. He further argued that the first respondent could not deal with a tax bill in a manner contrary to the agreement reached in that assembly and its reasons for denying issuance of the Tax Clearance Certificate were unlawful. Mr Mubaiwa submitted that the first respondent could not escape its obligations in terms of the agreement by running to the Zimra Act. It was his argument that the first respondent could not seek refuge under public law to run away from its private law obligations. Further, counsel submitted that the decision by the first respondent to participate and vote in favour of a CRP was an administrative decision because the first respondent is a public body and is instituted under s 2 of the Administrative Justice Act as an administrative body. Counsel argued that the first respondent had no right to retract from the CRP because administrative authorities are susceptible to the doctrine of functus officio when a court makes a decision it cannot change it on its own. He argued that the doctrine of functus officio exists to avoid abuse of power by the decision maker, and there was no justification under our law for the first respondent to change its mind, even if it was wrong. He argued that the first respondent, as a public body, must account and if it wants to resile from a contract, it must first seek the court’s clearance. He submitted that the CRP had been accepted by the Master of the High Court and if the first respondent had an issue with the position, it ought to involve the Master and an application for review must be lodged. Mr Mubaiwa submitted that s 121(1)(b) and s 126(1) of the Insolvency Act places a moratorium in favour of the applicant once it is under CR and such a moratorium says you cannot enforce claims against the applicant. He submitted that once the moratorium is placed, the assets of a company under CR are untenable. Further, he submitted that s 126 of the Insolvency Act does not discriminate creditors based on their status but simply refers to creditors and the moratorium is placed on the ability of creditors to touch the company’s assets. He thus argued that the first respondent was a creditor by circumstances of the tax bill and enjoyed no exemption and was not immune to that moratorium as it covered all debts and creditors. He argued that what the first respondent was entitled to do was to say that CRP was a compromise plan about the pre-tax regime but it did not cover tax obligations that arose before CR. Further, he argued that the first respondent was entitled to enforce the tax obligations that arose during the CR and could not refuse it on the basis of the pre-Corporate Resolution Bill. It was his submission that the effect of the first respondent’s actions reflected that it was characterising itself as a special creditor which did not have to follow the queue and was effectively collapsing the agreement reached with the CRP to the detriment of the rest of the creditors. Mr Mubaiwa argued that this matter had consequences beyond the applicant and if the first respondent were to be allowed to refuse to issue Tax Clearance Certificate to companies under CR, that would throw the entire jurisdiction into a nightmare. He argued that the first respondent would do it to everybody else and the effect would be a collapse of companies. Further, he argued that it would be contrary to its Act and Tax Law is not intended to collapse companies, as such, as a public policy consideration, the first respondent ought to be stopped. On the issue of costs, Mr Mubaiwa submitted that the first respondent’s conduct was totally unreasonable as neither the Insolvency Act nor the Zimra Act exists to collapse taxpayers. Further, he submitted that the first respondent entered into an agreement with that taxpayer and now sought to invoke its muscle under Public Law to bully other creditors. THE FIRST RESPONDENT’S SUBMISSIONS Per contra, Mr Banda submitted that the applicant’s argument that the dispute before the court was purely an insolvency matter and tax law was only relevant as one of the issues was patently misleading. It was his argument that the applicability of tax law was inescapable as one of the questions to be asked was whether the provision of Insolvency Law supersedes the tax laws. Further, he argued that there is no provision in the Insolvency Act that says it supersedes all other legislation. Counsel submitted that the suggestion that the CR Plan was a compromise agreement binding on every creditor was not true. He submitted that by refusing to issue the tax clearance certificate, the first respondent was not seeking to escape its obligations. Mr Banda argued that a CR Plan could not be said to be a compromise to extinguish the applicant’s tax obligations as a CR Plan in respect to tax obligations would only be there to delay but not to extinguish it. It was his position that a CR Plan was a compromise agreement but not a settlement. Counsel also argued that the first respondent could not enter into an agreement with any individual which is contrary to s 34C of the Zimra Act. Further, he argued that there was never such an agreement that the Tax Clearance would be issued notwithstanding the indebtedness. He also argued that the tax obligation was not part of the CR Plan and as such the CR Plan did not prevent the first respondent from urging the applicant to comply with s 34C of the Zimra Act first before a Tax Clearance certificate could be issued. In response to the applicant’s submission that allowing the first respondent to withhold a tax clearance would open floodgates, Mr Banda submitted that the court should consider a converse scenario where all companies would enter into CR to evade tax liability. He submitted that such would also open floodgates. Further, counsel submitted that the first respondent only required of the applicant to provide an undertaking on how it would liquidate the debt and not for the applicant to pay all that is due. He argued that no undertaking had been made. It was counsel’s argument that a right to a Tax Clearance is not an automatic right. Mr Banda submitted that the application before the court would lead the court to usurp the powers of the administrative authority as the court was being asked to grant a request for a Tax Clearance Certificate, which is contrary to administrative law. He argued that courts must not usurp the function of an administrative authority. For this proposition he relied on the cases of Manyame Fishing v DGP & Wildlife HH 92-11 and Appretait Private Limited & Anor v MK Airlines Private Limited 1996 (2) ZLR 15 SC. Counsel further argued that s 69 of the Income Tax Act obliges the payment of tax notwithstanding that the applicant ought to have made satisfactory arrangements to pay the bill. He submitted that the CR Plan rejected the tax claim and did not cater for the tax regime. As such, he submitted, the applicant could not benefit from its infractions. On the issue of costs, Mr Banda submitted that because of the nature of the dispute, even though it touched on Insolvency Law, the genesis of the argument was governed by tax legislation. It was his submission that unless the court took the position that the defence was frivolous, an order for costs would be made. He thus submitted that the applicant had not made a case for the grant of a declarator. THE APPLICANT’S RESPONSE Mr Mubaiwa submitted that it was not the correct position of the law that all statutory bodies that are entitled by law to collect some payments from businesses are immune from s 126 of the Insolvency Act. He argued that the common law has a presumption which says the statute which deals specifically with the subject matter is the one that takes precedence. Further, he submitted that s 126 of the Insolvency Act does not discriminate the creditors or their source, does not say whether creditors are private businesses but simply says all debts. Counsel submitted that the first respondent agreed to a compromise which did not say the tax bill should be paid under CR. It was his submission that the first respondent ought to have refused to vote in favour of that CR Plan. On the issue of costs, counsel submitted that the first respondent did not submit how other creditors would be protected under s 126 and the first respondent’s conduct could not be saved from the order of costs. It was his submission that the applicant could have asked for punitive costs as the CR Plan that the first respondent agreed to was being implemented and was being complied with since April 2024. ISSUES FOR DETERMINATION From an analysis of the submissions made by the parties, I consider the overarching issue for determination to be whether the applicant has satisfied the requirements for the declaratory order sought. More specifically, the issue to be addressed in assessing compliance with these requirements is whether the first respondent may lawfully decline to issue a TCC to the applicant during corporate rescue proceedings. I propose to address the second issue first. Only thereafter will it be appropriate to determine whether the requirements for a declaratory order have been met. WHETHER OR NOT THE FIRST RESPONDENT MAY LAWFULLY DECLINE TO ISSUE A TCC TO THE APPLICANT DURING CORPORATE RESCUE PROCEEDINGS. The parties have referred to provisions of the Revenue Authority Act [Chapter 23:11] and the Insolvency Act to support their respective positions. The key provisions relied upon are section 126 of the Insolvency Act and section 34C of the Revenue Authority Act. It is necessary to analyse and interpret these provisions to determine their meaning and ascertain whether they exempt a company undergoing corporate rescue proceedings from paying tax as alleged in the circumstances of this case. Section 126 of the Insolvency Act provides as follows: “126 General moratorium on legal proceedings against company (1) During corporate rescue proceedings, no legal proceeding, including enforcement action, against the company, or in relation to any property belonging to the company, or lawfully in its possession, may be commenced or proceeded with in any forum, except— with the written consent of the practitioner; or with the leave of the Court and in accordance with any terms the Court considers suitable; or as a set-off against any claim made by the company in any legal proceedings, irrespective of whether those proceedings commenced before or after the corporate rescue proceedings began; or criminal proceedings against the company or any of its directors or officers; or proceedings concerning any property or right over which the company exercises the powers of a trustee; or proceedings by a regulatory authority in the execution of its duties after written notification to the corporate rescue practitioner. (2) During corporate rescue proceedings, a guarantee or surety by a company in favour of any other person may not be enforced by any person against the company except with leave of the Court and in accordance with any terms the Court considers just and equitable in the circumstances. (3) If any right to commence proceedings or otherwise assert a claim against a company is subject to a time limit, the measurement of that time must be suspended during the company’s corporate rescue proceedings.” Section 126 of the Insolvency Act provides a general moratorium on legal proceedings against a company. The provision prescribes categories of actions prohibited against a company under corporate rescue proceedings, including legal proceedings. The term “legal proceedings” is expanded in subsection (1) to include, inter alia, an enforcement action against the company or its property. Such an enforcement action is not limited to property but may also be directed against the company itself and may be commenced or continued in any forum. Conditions for initiating legal proceedings, including an enforcement action, are stipulated, requiring, among other things, the written consent of the corporate rescue practitioner. Related to the provisions of section 126 of the Insolvency Act are the provisions of section 144(4) of the same Act. Section 144 of the Insolvency Act addresses corporate rescue plans. Subsection (4), which has been referenced, outlines the legal effect of a corporate rescue plan. It is necessary to cite the provision in full to contextualise the parties’ submissions. “(4) A corporate rescue plan that has been adopted is binding on the company, and on each of the creditors of the company and every holder of the company’s securities, whether or not such a person— was present at the meeting; or voted in favour of adoption of the plan; or in the case of creditors, had proved their claims against the company.” For its part, the first respondent cited section 34C of the Revenue Authority Act. The provision governs tax clearance certificates. Subsection (1), reproduced below, is central to resolving the present dispute: “34C Tax clearance certificates (1) At the request of a person liable to pay any tax under the Income Tax Act [Chapter 23:06] or any of the Acts specified in the First Schedule (“the Scheduled Acts”), the Commissioner-General shall, if such person is entitled to such a certificate in terms of any of those Acts, issue to him or her a certificate (called a “tax clearance certificate”) signed by or on behalf of the Commissioner-General to the effect as follows, namely that the person— has furnished a return under section 37 of the Income Tax Act [Chapter 23:06] for the last year of assessment for which such a return is due; has made arrangements satisfactory to the Commissioner-General for the furnishing of a return referred to in paragraph (a); has paid the appropriate presumptive tax in terms of the Twenty-Sixth Schedule to the Income Tax Act [Chapter 23:06] on the last date or occasion on which such tax was due before the certificate is presented for any purpose under that Act, or has made arrangements satisfactory to the Commissioner-General for the payment of such tax; in the case of a new or proposed company or private business corporation, has appointed a public officer of the company or private business corporation in accordance with section 61 of the Income Tax Act [Chapter 23:06]; has furnished any return required to be furnished under any of the Scheduled Acts on the last date or occasion on which such return was due before the certificate is presented for any purpose under those Acts, or has made arrangements satisfactory to the Commissioner-General for the furnishing of such a return; has paid the appropriate tax in terms of any of the Scheduled Acts on the last date or occasion on which such tax was due before the certificate is presented for any purpose under those Acts, or has made arrangements satisfactory to the Commissioner-General for the payment of such tax; being a registered operator for the purposes of the Value Added Tax Act [Chapter 23:12], has fiscalised his or her operations to the extent that they are interfaced with the Authority’s server.” The Revenue Authority Act and the Insolvency Act must be considered in juxtaposition. It is evident that the provisions of section 34C of the Revenue Authority Act, pertaining TCCs, do not account for the possibility of a business being placed under corporate rescue. They also fail to account for the moratorium established by the Insolvency Act and the binding nature of corporate rescue plans under the same Act. The legal question arising, therefore, is whether these provisions supersede those of the Revenue Authority Act. Counsel for the first respondent contended that they do not, while counsel for the applicant argued strenuously that they do. Consequently, the issue to be resolved is whether the provisions are in conflict. Several court decisions have outlined interpretative rules for reconciling seemingly conflicting statutory provisions, which must be discussed at length. When interpreting statutes, if there is a conflict between two laws, the general rule is that the later statute takes precedence over the earlier one. This principle reflects the idea that the legislature, by enacting the later law, has implied an intention to modify or override the earlier law. The rationale behind this is that, in most cases, the more recent law represents the legislature’s updated intent, and thus should prevail in the event of a contradiction. In the case of Tamanikwa & Ors v Zimbabwe Manpower Development Fund 2013 (2) ZLR 46 (S) at 54 of it was held that: “There is a general rule of statutory interpretation that where two statutes are in conflict with each other, the later statute, by virtue of the principle of lex posterior derogate priori, is deemed to be the superior one on the basis of implied repeal. This is because it is presumed that when the legislature passes the latter Act it is presumed to have knowledge of the earlier Act.” In Wendywood Development (Pty) Ltd v Rieger & Anor 1971 (3) SA 28 (A) at 38, the court held that: “It is necessary to bear in mind a well-known principle of statutory construction, namely, that statutes must be read together and the later one must not be so construed as to B repeal the provisions of the earlier one, unless the later statute expressly alters the provisions of the earlier one or such alteration is a necessary inference from the terms of the later statute, Kent, N.O. v South African Railways and Another, 1946 AD 398 at p. 405.” Similarly, in Heavy Transport & Plant Hire (Pty) Ltd &Ors v Minister of Transport Affairs & Ors 1985 (2) SA 597 at 604B-D, Nestadt J stated: “The principle is that statutes must be read together and the later one must not be so construed as to repeal the provisions of an earlier one or to take away rights conferred by an earlier one unless the later statute expressly alters the provisions of the earlier one in that respect, or such alteration is a necessary inference from the terms of the later statute. The inference must be a necessary one and not merely a possible one. (Kent N.O. v South African Railways and Another 1946 AD 398 at 405) As KOTZE AJA stated in New Modderfontein Gold Mining Co v Transvaal Provincial Administration 1919 AD 367 at 400: ‘It is only when the language used in the subsequent statute is so manifestly inconsistent with that employed in the former legislation that there is a repugnance and contradiction, so that the one conflicts with the other, that we are justified in coming to the conclusion that the earlier Act has been repealed by the later one’.” It is also important to observe that when there are conflicting statutes or provisions within the same statute, it is the court’s responsibility to reconcile any inconsistencies, if possible. Sedgefield Ratepayers’ and Voters’ Association and Others v Government of the Republic of South Africa & Ors 1989 (2) SA 685 (C) at 700J to 701 (A) it was held that: “In considering two Acts which seemingly deal with the same matter any interpretation of them must try to reconcile the one with the other. It is well known principle that a Court must give effect to every word or clause used in a statute on the basis that the Legislature did not intend them to be superfluous void insignificant or repetitive…” Additional considerations come into play where a fiscal statute is involved. These rules ought to be invoked in interpreting the Revenue Authority Act. The general position of the law is that fiscal legislation must be interpreted in a manner that reflects the legislature's intent, even if it leads to hardship for the taxpayer or loss to the fiscus. This was stated in the case of M. M. W. (Pvt) Ltd v Zimbabwe Revenue Authority HH 31-22 at p. 8-9: “I will, however, not lose sight of the fact that this is a fiscal case which has a different regime of statutory construction. In the case of Loewenstein v COT 1956 (4) SA 766 (FS) at 772 B Murray CJ quoted Lord Cairns in Partington v AG 21 LT p 375 as follows: ‘I am not at all sure that in a case of this kind – a fiscal case – form is not amply sufficient, because as I understand the principle of all fiscal legislation it is this: if the person sought to be taxed comes within the letter of the law, he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free however apparently within the law the case might otherwise appear to be. In other words, if there be an equitable construction, certainly such a construction is not admissible in a taxing statute, where you can simply adhere to the words of the statutes.” See also Zimbabwe Platinum Mines v Zimbabwe Revenue Authority SC 16-23. In CW v Commissioner of Taxes 1988 (2) ZLR 27 (HC), the court emphasised that a strict approach ought to be adopted when interpreting fiscal legislation. The court held as follows at p. 35-36: “As regards taxing Acts, which is what is under consideration in this case, in Canadian Eagle Oil Co Ltd v R [1945] 2 All ER 499 (HL) at 506 and 507 Viscount Simon LC said: “The late Rowlatt J, whose outstanding knowledge of this subject was coupled with a happy conciseness of phrase, said in Cape Brandy Syndicate v Inland Revenue Commissioners (7) at p 71: “. . . in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.” In W T Ramsay Ltd v Inland Revenue Commissioners [1981] 1 All ER 865 (HL) Lord Wilberforce at pp. 870 and 871 restated “some familiar principles” relating to fiscal legislation, the first one being — “1. A subject is only to be taxed on clear words, not on “intendment” or on the “equity” of an Act. Any taxing Act of Parliament is to be construed in accordance with this principle. What are “clear words” is to be ascertained on normal principles; these do not confine the courts to literal interpretation. There may, indeed should, be considered the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded.” It is important to note that the above approach applies when the fiscal legislation is clear and unambiguous in its interpretation. However, in cases of ambiguity, the contra fiscum rule must be applied. The rule stipulates that where there is ambiguity, fiscal legislation must be interpreted in a way that favours the taxpayer – see Zimbabwe Revenue Authority v Waringa Investments (Pvt) Ltd SC 84-13 at p. 7. Applying these principles to the present case, one observes that the Insolvency Act postdates the Revenue Authority Act. A clear conflict exists between the two statutes. The Insolvency Act imposes a moratorium on legal proceedings, including an enforcement action, in favour of a company under corporate rescue proceedings. If the Insolvency Act provides for such a moratorium, it is evident that the legislature intended to shield a company from obligations arising prior to corporate rescue proceedings, as well as from legal action that could jeopardise the survival of the business. This was made clear in the case Metallon Gold Zimbabwe (Private) Limited & Ors v Shatirwa Investments (Private) Limited & Ors SC 107-21 at pp 9 -12: “Corporate rescue, on the other hand, is seen as a measure which seeks to avoid the liquidation of a company in order to preserve it in a solvent state for the benefit of the company’s security holders and creditors including the company’s workers, as well as the society in which it exists. This approach is broader than the approach under judicial management, in that it seeks to cover the interests of all stakeholders who benefit from the existence of the entity concerned. ... In Koen and Anor v Wedgewood Village Golf & Country Estate (Pty) Ltd and Ors 2012 (2) SA 378 (WCC) at 383 the court stated that: “It is clear that the legislature has recognised that the liquidation of companies more frequently than not occasions significant collateral damage, both economically and socially, with attendant destruction of wealth and livelihoods. It is obvious that it is in the public interest that the incidence of such adverse socioeconomic consequences should be avoided were reasonably possible. Business rescue is intended to serve that public interest by providing a remedy directed at avoiding the deleterious consequences of liquidations in cases in which there is a reasonable prospect of salvaging the business of a company in financial distress, or of securing a better return to creditors than would probably be achieved in an immediate liquidation.” Corporate rescue proceedings are much more flexible and financially distressed company friendly than judicial management. The purpose is to facilitate the continued existence of a company in a state of solvency and to facilitate a better return on shareholders’ income....” Taking into account the purpose of corporate rescue, it follows that the process is intended to ensure that a company is resuscitated to financial profitability. Given that the first respondent’s claims were considered during the corporate rescue plan deliberations and rejected by the corporate rescue practitioner, the first respondent cannot now seek to challenge the rejection of its claim. In any event, the provisions of the Insolvency Act take precedence. Consequently, the first respondent’s submissions lack merit, and it cannot lawfully refuse to issue a TCC. The applicant’s claim, therefore, has merit. WHETHER THE APPLICANT HAS SATISFIED THE REQUIREMENTS FOR THE DECLARATORY ORDER SOUGHT. Having disposed of the first issue, it is now necessary to consider whether the applicant has satisfied the requirements for a declaratory order. The requirements for such an order are settled having been articulated by this court and other superior courts in various decisions. I set out the requirements below for completeness. The starting point is the High Court Act [Chapter 7:06]. Section 14 of the High Court Act [Chapter 7:06] provides as follows: “The High Court may, in its discretion, at the instance of any interested person, inquire into and determine any existing, future or contingent right or obligation, notwithstanding that such person cannot claim any relief consequential upon such determination.” In discussing the prerequisites to the granting of a declarator, the Supreme Court in the case of Johnsen v Agricultural Finance Corp 1995 (1) ZLR 65 (S) p. 73 held that: “The condition precedent to the grant of a declaratory order under s 14 of the High Court of Zimbabwe Act 1981 is that the applicant must be an “interested person”, in the sense of having a direct and substantial interest in the subject matter of the suit which could be prejudicially affected by the judgment of the court. The interest must concern an existing, future or contingent right. The court will not decide abstract, academic or hypothetical questions unrelated thereto…. At the second stage of the enquiry, the court is obliged to decide whether the case before it is a proper one for the exercise of its discretion under s 14 of the Act. It must take account of all the circumstances of the matter.” The same position was followed by the High Court in the case of Recoy Investments (Pvt) Ltd v Tarcon 2011 (2) ZLR 65 (H) p. 70 F-G it was held that: “It is trite that an existing dispute is not a pre-requisite for the making of a declaratory order and the court is not precluded from granting a declaratory order on the basis that there is no dispute. However, the court will not exercise its discretion where the applicant has, in seeking a declaratory order, raised abstract, hypothetical or academic questions. The applicant must have some tangible and justifiable interest in relation to an existing future or contingent right or obligation which will flow from the grant of the declaratory order. A person seeking a declaration of rights must set forth his contention as to what that alleged right is. He must also show that he has an interest in the right. Inherent in the concept of a right is the idea that it, the right, resides in a determinate person and the persons interested in the right are those in whom it inheres on against whom it avails” See also Milani & Anor v South African Medical & Dental Council & Anor 1990 (1) SA 899 (T) at 902G-H, Mpukuta v Maker Insurance Pool & Ors 2012 (1) ZLR 192 (H), Munn Publishing (Pvt) Ltd v ZBC 1994 (1) ZLR 337 (S) at 343E to 344E. Clearly, the applicant’s claim cannot be regarded as abstract, hypothetical, or academic. The declaratory order sought relates to issues directly affecting the applicant’s business interests. The applicant has demonstrated a justifiable interest in obtaining TCC, as articulated in the founding affidavit, which concerns its profitability and compliance with regulatory requirements imposed by authorities or local authorities. The applicant, through the corporate rescue practitioner, has established a right to the issuance of a TCC. This Court is therefore satisfied that the requirements for granting the declaratory order sought have been met. COSTS In deciding the issue of costs, the general rules regarding costs were taken into account. In the case of Crief Investments (Pvt) Ltd & Anor v Grand Home Center (Pvt) Ltd & Ors HH 12-18 it was held as follows: “The general rule is that costs follow the event, in other words, the successful party is usually awarded costs. The rationale for this principle is that the successful litigant should be indemnified from expenses which he/she incurred by reason of being unjustifiably compelled to either initiate or defend litigation. This rule should only be departed from when good grounds are shown to exist.” Similarly, in Mahembe v Matambo HB 13-03 at p. 2, the court stated that: “The general rule is that costs follow the event or put in another way success carries costs. The rationale for this principle is that the successful litigant should be indemnified from expenses which he incurred by reason of being unjustifiably compelled to either initiate or defend litigation. This rule should only be departed from where good grounds are shown to exist.” Taking into account the ordinary rules governing costs in proceedings before this Court, I discern no compelling reason to deviate from the established principles. The applicant was compelled to incur expenses in persuading the tax authorities that, under the circumstances of this case, a company under corporate rescue—such as itself—may be exempted from certain tax obligations pursuant to a duly approved corporate rescue plan. The applicant was entitled to assert its legal rights, which accrued primarily under the provisions of the Insolvency Act. In the circumstances, equity demanded that costs follow the event. Accordingly, the costs of these proceedings were to follow the result. It is for this reason that the order issued on 20 February 2025 included an order of costs. DISPOSITION Based on the foregoing analysis, I found no reason to decline the applicant’s request for the order sought. The applicant satisfied the requirements for a declaratory order. I was satisfied that, in the circumstances of this case, the first respondent could not refuse to issue the applicant a TCC when it had been aware, at all material times, that the applicant was under corporate rescue proceedings and had even participated in them. The decision was grounded in the purpose of corporate rescue proceedings, which is to safeguard the business interests of a struggling company. The objectives of the Insolvency Act, which postdates the Revenue Authority Act, would be defeated if enforcement authorities imposed unreasonable conditions without regard for the legislative intent of the Insolvency Act. Accordingly, for these reasons, I granted the order set out at the outset of this judgment. Maguchu & Muchada Business Attorneys, applicant’s legal practitioners Sinyoro and Partners, first respondent’s legal practitioners 8 HH166-25 HCH 320/25 8 HH166-25 HCH 320/25 PACIFIC CIGARETTES COMPANY (PVT) LTD (under corporate rescue proceedings) versus THE ZIMBABWE REVENUE AUTHORITY and THE MASTER OF THE HIGH COURT HIGH COURT OF ZIMBABWE MANDAZA J HARARE, 13 February 2025 & 20 February 2025 Urgent Court Application E Mubaiwa, for the applicant S Banda with K Manyika, for the first respondent No appearance for the second respondent MANDAZA J: On 24 January 2025, the applicant filed an urgent chamber application for a declarator and consequential relief in terms of rule 59(6) of the High Court Rules, 2021. After hearing submissions from counsel for the parties on the merits on 20 February 2025, I issued the following order: “WHEREUPON, after reading documents filed of record and hearing counsel IT IS ORDERED THAT: The application be and is hereby granted with costs. It is declared that during the tenure of corporate rescue proceedings the First Respondent cannot directly or indirectly enforce payment of tax debts that arose prior to commencement of corporate rescue proceedings except, in terms of the provisions of Part XXIII of the Insolvency Act [Chapter 6:07]. Consequent to paragraph 2 above, the First Respondent should issue to the Applicant Tax Clearance Certificates during the tenure of the corporate rescue proceedings, provided the Applicant has complied with its tax obligations that arose during the corporate rescue process or has made suitable arrangements with the First Respondent for discharging such obligations.” The first respondent has requested that I furnish reasons for the judgment, indicating an intention to note an appeal against the judgment. These are the reasons. FACTUAL BACKGROUND The applicant is a company duly incorporated in terms of the Companies and Other Businesses Act [Chapter 24:31]. The first respondent is an administrative authority responsible for the collection of taxes and is established in terms of the Revenue Authority Act [Chapter 23:11] (“the Revenue Authority Act”). The applicant was placed under corporate rescue in terms of the Insolvency Act [Chapter 6:07] and as a consequence, its affairs fall entirely under the administration of a Corporate Rescue Practitioner (CRP). The applicant is suing the first respondent to compel it to issue a tax clearance certificate (TCC). It is the applicant’s contention that a valid TCC is required to enable it to properly conduct business. As already noted, the applicant is operating under corporate rescue in terms of the Insolvency Act. Its affairs are administered by a corporate rescue practitioner, who deposed to an affidavit on its behalf. The applicant fears that if it fails to obtain a valid TCC, its business operations will be prejudiced. In this regard, the applicant pleads that a valid TCC is required for several operations and regulatory requirements. To it, a TCC is a precondition for licensing, imports and exports, and that the absence of a TCC will hinder its various operations and interactions with various government agencies and regulators. Briefly, the background events on which the applicant’s cause of action is founded is that in January 2025, following an application for a TCC, the applicant was advised by the first respondent’s liaison officer that a TCC could not be issued as it had an outstanding balance of ZWG 1 million on current obligations and other tax obligations in excess of US$19 million. Accordingly, the applicant paid the amount of ZWG 1 million representing its current tax obligations. It is the applicant’s case that by 3 January 2025 its tax account was up to date on all current obligations. The applicant then followed up with the first respondent’s liaison officer for the issuance of a TCC. The applicant was advised that its application for a TCC was being declined due to its outstanding tax obligations. In response, the applicant was of the view that the corporate rescue plan, which had been approved following a meeting with its creditors held in 2024, incorporated its outstanding tax obligations. Accordingly, the aforementioned that tax obligations would be paid in accordance with the corporate rescue plan. The basis of the applicant’s reference to the corporate rescue plan was that the first respondent was part of the creditors who attended and voted at the creditors’ meeting at which the corporate rescue plan was drawn up. The applicant also contended with the first respondent’s officials that the refusal of a TCC would amount to an enforcement action that is prohibited under section 126 of the Insolvency Act and would have the effect of defeating the corporate rescue plan binding upon all creditors, including the first respondent. In response, the first respondent questioned the basis upon which the applicant had claimed to be exempted from satisfying its outstanding tax obligations on the basis of the corporate rescue proceedings under which it had been placed. It is important to reproduce a part of the letter authored by officials of the first respondent in terms of which it was clear that the first respondent would not issue the TCC. The relevant part of the letter stated: “I recognise that while Section 126 of the Insolvency Act suspends the recovery processes, it does not guarantee the issuance of a Tax Clearance Certificate (TCC). Furthermore, there is a question as to whether the provisions of the Insolvency Act, including section 126, supersede the provisions of Statutes administered by ZIMRA, especially where nothing in the Insolvency Act has overriding effect. Some laws are clear that they have an overriding effect and that they would have clauses which say that notwithstanding what any other statute says. An example is Section 58 subsection 1 of the Income Tax Act which say, “The Commissioner may, if he thinks necessary, declare any person to be an agent of any other person, and the person so declared an agent shall be the agent of such other person for the purposes of this Act, and, notwithstanding anything to the contrary contained in any other law, may be required to pay any tax due from the moneys in the current account, deposit account, fixed deposit account or savings account, or from any other moneys, including pensions, salary, wages or any other remuneration, which may be held by him, or due by him to, the person whose agent he has been declared to be.” In any case, section 126(1)(f) of the Insolvency Act seems to provide aus with leeway to just advise you what we intend to do implying that we can follow up on any assessed tax.” The first respondent had made its position clear. Taking into account the provisions of the Insolvency Act, the applicant was of the view that the first respondent has no power to decline a TCC in terms of the Revenue Authority Act [Chapter 23:11] on the basis that there is no satisfactory arrangement to settle a debt that arose before the commencement of the corporate rescue proceedings, or on any other basis, and any other enforcement mechanisms for such debts are suspended by operation of law during the corporate rescue proceedings. Convinced of its rights under the Insolvency Act, the applicant filed this urgent chamber application to vindicate its business interests following the refusal to issue a TCC by the first respondent. The applicant sought relief in the following terms: “IT IS ORDERED THAT: The Application be and is hereby granted with costs. It is declared that, during the tenure of corporate rescue proceedings, the First Respondent cannot directly or indirectly enforce payment of tax debts, that arose prior to commencement of corporate rescue proceedings, except in terms of the provisions of the Part XXIII of the Insolvency Act (Chapter 6:07). Consequent to paragraph 2 above, the First Respondent should issue to the Applicant Tax Clearance Certificates during the tenure of corporate rescue proceedings.” Only the first respondent opposed the application. The first respondent’s key contention was that no satisfactory arrangements had been made to date for the payment of the outstanding tax obligations owed to it by the applicant. Accordingly, the first respondent found no basis upon which it could lawfully issue a TCC to the applicant. It is important to also observe that in its opposing affidavit, the first respondent raised several preliminary points. First, it argued that the matter was not urgent. Second, it contended that the applicant’s draft order was incompetent, as the third paragraph purported to seek an unconditional and perpetual right to the issuance of a TCC for the entire duration of the corporate rescue proceedings. When the papers were placed before me by the registrar, I directed the parties to attend a chamber hearing on an urgent basis. At the hearing, the first respondent raised two preliminary issues. The first was that the matter lacked urgency, as the alleged urgency was self-created by the applicant. The second, as noted in the first respondent’s opposing papers, was that the relief sought was incompetent. For completeness, I reserved judgment after hearing submissions on those issues and later dismissed them for lack of merit. The judgment of this court regarding the procedural points was issued under judgment number HH99/25. The registrar was thereafter ordered to re-enrol this matter for hearing on the merits on an urgent basis. These reasons now address the parties’ submissions on the merits of the applicant’s claim. SUBMISSIONS BEFORE THIS COURT At the hearing, Mr Mubaiwa¸for the applicant, submitted as a preliminary point that they were seeking an amendment of the Draft Order, specifically to para 3. Mr Banda was not opposed to the amendment. On the merits, counsel for the applicant submitted that the matter before the court was not a tax dispute but rather an insolvency law dispute and as such did not invite the application of tax law statutes. It was his submission that the issue of taxation was only relevant to one of the sources of insolvency. He argued that the first respondent, as part of or an arm of the State, was not entitled to hide behind public law in order to escape obligation from its participation in private law contracts. He further argued that the Tax Bill, which the first respondent relied on to refuse Tax Clearance Certificates, was part of the Corporate Rescue (CR) process. It was Mr Mubaiwa’s submission that under the CR Process, the Corporate Rescue Practitioner (CPR) of the creditors met as an assembly and voted for the CPR Plan and that the circumstance or vote or approval of the plan was a compromise agreement binding on every creditor that took part in the vote. For this proposition, he relied on the cases of Metallon Gold Zimbabwe (Private) Limited & Ors v Shatirwa Investments (Private) Limited & Ors SC 107-21 and Minister of Justice, Legal & Parliamentary Affairs v Muskwe & Ors SC 67-22. Mr Mubaiwa also placed reliance on the judgment of Buwu & Anor v Village Inn PL & Ors SC 112-23 to argue the legal effect of a scheme of arrangement under s 191 of the repealed Companies Act. He submitted that in the Buwu case the court ordered that there be a scheme arrangement and the creditors met and agreed on how the liabilities would be managed and the scheme was to be registered with the Registrar of Companies. He further submitted that such an agreement created a contract binding between the company and all the creditors that partook in the scheme and a party was therefore not entitled to proceed contrary to that scheme of arrangement. Counsel thus argued that the same principle applied in this matter as there was a contract involving the applicant and the first respondent bearing on how financial obligations were to be discharged. He further argued that the first respondent could not deal with a tax bill in a manner contrary to the agreement reached in that assembly and its reasons for denying issuance of the Tax Clearance Certificate were unlawful. Mr Mubaiwa submitted that the first respondent could not escape its obligations in terms of the agreement by running to the Zimra Act. It was his argument that the first respondent could not seek refuge under public law to run away from its private law obligations. Further, counsel submitted that the decision by the first respondent to participate and vote in favour of a CRP was an administrative decision because the first respondent is a public body and is instituted under s 2 of the Administrative Justice Act as an administrative body. Counsel argued that the first respondent had no right to retract from the CRP because administrative authorities are susceptible to the doctrine of functus officio when a court makes a decision it cannot change it on its own. He argued that the doctrine of functus officio exists to avoid abuse of power by the decision maker, and there was no justification under our law for the first respondent to change its mind, even if it was wrong. He argued that the first respondent, as a public body, must account and if it wants to resile from a contract, it must first seek the court’s clearance. He submitted that the CRP had been accepted by the Master of the High Court and if the first respondent had an issue with the position, it ought to involve the Master and an application for review must be lodged. Mr Mubaiwa submitted that s 121(1)(b) and s 126(1) of the Insolvency Act places a moratorium in favour of the applicant once it is under CR and such a moratorium says you cannot enforce claims against the applicant. He submitted that once the moratorium is placed, the assets of a company under CR are untenable. Further, he submitted that s 126 of the Insolvency Act does not discriminate creditors based on their status but simply refers to creditors and the moratorium is placed on the ability of creditors to touch the company’s assets. He thus argued that the first respondent was a creditor by circumstances of the tax bill and enjoyed no exemption and was not immune to that moratorium as it covered all debts and creditors. He argued that what the first respondent was entitled to do was to say that CRP was a compromise plan about the pre-tax regime but it did not cover tax obligations that arose before CR. Further, he argued that the first respondent was entitled to enforce the tax obligations that arose during the CR and could not refuse it on the basis of the pre-Corporate Resolution Bill. It was his submission that the effect of the first respondent’s actions reflected that it was characterising itself as a special creditor which did not have to follow the queue and was effectively collapsing the agreement reached with the CRP to the detriment of the rest of the creditors. Mr Mubaiwa argued that this matter had consequences beyond the applicant and if the first respondent were to be allowed to refuse to issue Tax Clearance Certificate to companies under CR, that would throw the entire jurisdiction into a nightmare. He argued that the first respondent would do it to everybody else and the effect would be a collapse of companies. Further, he argued that it would be contrary to its Act and Tax Law is not intended to collapse companies, as such, as a public policy consideration, the first respondent ought to be stopped. On the issue of costs, Mr Mubaiwa submitted that the first respondent’s conduct was totally unreasonable as neither the Insolvency Act nor the Zimra Act exists to collapse taxpayers. Further, he submitted that the first respondent entered into an agreement with that taxpayer and now sought to invoke its muscle under Public Law to bully other creditors. THE FIRST RESPONDENT’S SUBMISSIONS Per contra, Mr Banda submitted that the applicant’s argument that the dispute before the court was purely an insolvency matter and tax law was only relevant as one of the issues was patently misleading. It was his argument that the applicability of tax law was inescapable as one of the questions to be asked was whether the provision of Insolvency Law supersedes the tax laws. Further, he argued that there is no provision in the Insolvency Act that says it supersedes all other legislation. Counsel submitted that the suggestion that the CR Plan was a compromise agreement binding on every creditor was not true. He submitted that by refusing to issue the tax clearance certificate, the first respondent was not seeking to escape its obligations. Mr Banda argued that a CR Plan could not be said to be a compromise to extinguish the applicant’s tax obligations as a CR Plan in respect to tax obligations would only be there to delay but not to extinguish it. It was his position that a CR Plan was a compromise agreement but not a settlement. Counsel also argued that the first respondent could not enter into an agreement with any individual which is contrary to s 34C of the Zimra Act. Further, he argued that there was never such an agreement that the Tax Clearance would be issued notwithstanding the indebtedness. He also argued that the tax obligation was not part of the CR Plan and as such the CR Plan did not prevent the first respondent from urging the applicant to comply with s 34C of the Zimra Act first before a Tax Clearance certificate could be issued. In response to the applicant’s submission that allowing the first respondent to withhold a tax clearance would open floodgates, Mr Banda submitted that the court should consider a converse scenario where all companies would enter into CR to evade tax liability. He submitted that such would also open floodgates. Further, counsel submitted that the first respondent only required of the applicant to provide an undertaking on how it would liquidate the debt and not for the applicant to pay all that is due. He argued that no undertaking had been made. It was counsel’s argument that a right to a Tax Clearance is not an automatic right. Mr Banda submitted that the application before the court would lead the court to usurp the powers of the administrative authority as the court was being asked to grant a request for a Tax Clearance Certificate, which is contrary to administrative law. He argued that courts must not usurp the function of an administrative authority. For this proposition he relied on the cases of Manyame Fishing v DGP & Wildlife HH 92-11 and Appretait Private Limited & Anor v MK Airlines Private Limited 1996 (2) ZLR 15 SC. Counsel further argued that s 69 of the Income Tax Act obliges the payment of tax notwithstanding that the applicant ought to have made satisfactory arrangements to pay the bill. He submitted that the CR Plan rejected the tax claim and did not cater for the tax regime. As such, he submitted, the applicant could not benefit from its infractions. On the issue of costs, Mr Banda submitted that because of the nature of the dispute, even though it touched on Insolvency Law, the genesis of the argument was governed by tax legislation. It was his submission that unless the court took the position that the defence was frivolous, an order for costs would be made. He thus submitted that the applicant had not made a case for the grant of a declarator. THE APPLICANT’S RESPONSE Mr Mubaiwa submitted that it was not the correct position of the law that all statutory bodies that are entitled by law to collect some payments from businesses are immune from s 126 of the Insolvency Act. He argued that the common law has a presumption which says the statute which deals specifically with the subject matter is the one that takes precedence. Further, he submitted that s 126 of the Insolvency Act does not discriminate the creditors or their source, does not say whether creditors are private businesses but simply says all debts. Counsel submitted that the first respondent agreed to a compromise which did not say the tax bill should be paid under CR. It was his submission that the first respondent ought to have refused to vote in favour of that CR Plan. On the issue of costs, counsel submitted that the first respondent did not submit how other creditors would be protected under s 126 and the first respondent’s conduct could not be saved from the order of costs. It was his submission that the applicant could have asked for punitive costs as the CR Plan that the first respondent agreed to was being implemented and was being complied with since April 2024. ISSUES FOR DETERMINATION From an analysis of the submissions made by the parties, I consider the overarching issue for determination to be whether the applicant has satisfied the requirements for the declaratory order sought. More specifically, the issue to be addressed in assessing compliance with these requirements is whether the first respondent may lawfully decline to issue a TCC to the applicant during corporate rescue proceedings. I propose to address the second issue first. Only thereafter will it be appropriate to determine whether the requirements for a declaratory order have been met. WHETHER OR NOT THE FIRST RESPONDENT MAY LAWFULLY DECLINE TO ISSUE A TCC TO THE APPLICANT DURING CORPORATE RESCUE PROCEEDINGS. The parties have referred to provisions of the Revenue Authority Act [Chapter 23:11] and the Insolvency Act to support their respective positions. The key provisions relied upon are section 126 of the Insolvency Act and section 34C of the Revenue Authority Act. It is necessary to analyse and interpret these provisions to determine their meaning and ascertain whether they exempt a company undergoing corporate rescue proceedings from paying tax as alleged in the circumstances of this case. Section 126 of the Insolvency Act provides as follows: “126 General moratorium on legal proceedings against company (1) During corporate rescue proceedings, no legal proceeding, including enforcement action, against the company, or in relation to any property belonging to the company, or lawfully in its possession, may be commenced or proceeded with in any forum, except— with the written consent of the practitioner; or with the leave of the Court and in accordance with any terms the Court considers suitable; or as a set-off against any claim made by the company in any legal proceedings, irrespective of whether those proceedings commenced before or after the corporate rescue proceedings began; or criminal proceedings against the company or any of its directors or officers; or proceedings concerning any property or right over which the company exercises the powers of a trustee; or proceedings by a regulatory authority in the execution of its duties after written notification to the corporate rescue practitioner. (2) During corporate rescue proceedings, a guarantee or surety by a company in favour of any other person may not be enforced by any person against the company except with leave of the Court and in accordance with any terms the Court considers just and equitable in the circumstances. (3) If any right to commence proceedings or otherwise assert a claim against a company is subject to a time limit, the measurement of that time must be suspended during the company’s corporate rescue proceedings.” Section 126 of the Insolvency Act provides a general moratorium on legal proceedings against a company. The provision prescribes categories of actions prohibited against a company under corporate rescue proceedings, including legal proceedings. The term “legal proceedings” is expanded in subsection (1) to include, inter alia, an enforcement action against the company or its property. Such an enforcement action is not limited to property but may also be directed against the company itself and may be commenced or continued in any forum. Conditions for initiating legal proceedings, including an enforcement action, are stipulated, requiring, among other things, the written consent of the corporate rescue practitioner. Related to the provisions of section 126 of the Insolvency Act are the provisions of section 144(4) of the same Act. Section 144 of the Insolvency Act addresses corporate rescue plans. Subsection (4), which has been referenced, outlines the legal effect of a corporate rescue plan. It is necessary to cite the provision in full to contextualise the parties’ submissions. “(4) A corporate rescue plan that has been adopted is binding on the company, and on each of the creditors of the company and every holder of the company’s securities, whether or not such a person— was present at the meeting; or voted in favour of adoption of the plan; or in the case of creditors, had proved their claims against the company.” For its part, the first respondent cited section 34C of the Revenue Authority Act. The provision governs tax clearance certificates. Subsection (1), reproduced below, is central to resolving the present dispute: “34C Tax clearance certificates (1) At the request of a person liable to pay any tax under the Income Tax Act [Chapter 23:06] or any of the Acts specified in the First Schedule (“the Scheduled Acts”), the Commissioner-General shall, if such person is entitled to such a certificate in terms of any of those Acts, issue to him or her a certificate (called a “tax clearance certificate”) signed by or on behalf of the Commissioner-General to the effect as follows, namely that the person— has furnished a return under section 37 of the Income Tax Act [Chapter 23:06] for the last year of assessment for which such a return is due; has made arrangements satisfactory to the Commissioner-General for the furnishing of a return referred to in paragraph (a); has paid the appropriate presumptive tax in terms of the Twenty-Sixth Schedule to the Income Tax Act [Chapter 23:06] on the last date or occasion on which such tax was due before the certificate is presented for any purpose under that Act, or has made arrangements satisfactory to the Commissioner-General for the payment of such tax; in the case of a new or proposed company or private business corporation, has appointed a public officer of the company or private business corporation in accordance with section 61 of the Income Tax Act [Chapter 23:06]; has furnished any return required to be furnished under any of the Scheduled Acts on the last date or occasion on which such return was due before the certificate is presented for any purpose under those Acts, or has made arrangements satisfactory to the Commissioner-General for the furnishing of such a return; has paid the appropriate tax in terms of any of the Scheduled Acts on the last date or occasion on which such tax was due before the certificate is presented for any purpose under those Acts, or has made arrangements satisfactory to the Commissioner-General for the payment of such tax; being a registered operator for the purposes of the Value Added Tax Act [Chapter 23:12], has fiscalised his or her operations to the extent that they are interfaced with the Authority’s server.” The Revenue Authority Act and the Insolvency Act must be considered in juxtaposition. It is evident that the provisions of section 34C of the Revenue Authority Act, pertaining TCCs, do not account for the possibility of a business being placed under corporate rescue. They also fail to account for the moratorium established by the Insolvency Act and the binding nature of corporate rescue plans under the same Act. The legal question arising, therefore, is whether these provisions supersede those of the Revenue Authority Act. Counsel for the first respondent contended that they do not, while counsel for the applicant argued strenuously that they do. Consequently, the issue to be resolved is whether the provisions are in conflict. Several court decisions have outlined interpretative rules for reconciling seemingly conflicting statutory provisions, which must be discussed at length. When interpreting statutes, if there is a conflict between two laws, the general rule is that the later statute takes precedence over the earlier one. This principle reflects the idea that the legislature, by enacting the later law, has implied an intention to modify or override the earlier law. The rationale behind this is that, in most cases, the more recent law represents the legislature’s updated intent, and thus should prevail in the event of a contradiction. In the case of Tamanikwa & Ors v Zimbabwe Manpower Development Fund 2013 (2) ZLR 46 (S) at 54 of it was held that: “There is a general rule of statutory interpretation that where two statutes are in conflict with each other, the later statute, by virtue of the principle of lex posterior derogate priori, is deemed to be the superior one on the basis of implied repeal. This is because it is presumed that when the legislature passes the latter Act it is presumed to have knowledge of the earlier Act.” In Wendywood Development (Pty) Ltd v Rieger & Anor 1971 (3) SA 28 (A) at 38, the court held that: “It is necessary to bear in mind a well-known principle of statutory construction, namely, that statutes must be read together and the later one must not be so construed as to B repeal the provisions of the earlier one, unless the later statute expressly alters the provisions of the earlier one or such alteration is a necessary inference from the terms of the later statute, Kent, N.O. v South African Railways and Another, 1946 AD 398 at p. 405.” Similarly, in Heavy Transport & Plant Hire (Pty) Ltd &Ors v Minister of Transport Affairs & Ors 1985 (2) SA 597 at 604B-D, Nestadt J stated: “The principle is that statutes must be read together and the later one must not be so construed as to repeal the provisions of an earlier one or to take away rights conferred by an earlier one unless the later statute expressly alters the provisions of the earlier one in that respect, or such alteration is a necessary inference from the terms of the later statute. The inference must be a necessary one and not merely a possible one. (Kent N.O. v South African Railways and Another 1946 AD 398 at 405) As KOTZE AJA stated in New Modderfontein Gold Mining Co v Transvaal Provincial Administration 1919 AD 367 at 400: ‘It is only when the language used in the subsequent statute is so manifestly inconsistent with that employed in the former legislation that there is a repugnance and contradiction, so that the one conflicts with the other, that we are justified in coming to the conclusion that the earlier Act has been repealed by the later one’.” It is also important to observe that when there are conflicting statutes or provisions within the same statute, it is the court’s responsibility to reconcile any inconsistencies, if possible. Sedgefield Ratepayers’ and Voters’ Association and Others v Government of the Republic of South Africa & Ors 1989 (2) SA 685 (C) at 700J to 701 (A) it was held that: “In considering two Acts which seemingly deal with the same matter any interpretation of them must try to reconcile the one with the other. It is well known principle that a Court must give effect to every word or clause used in a statute on the basis that the Legislature did not intend them to be superfluous void insignificant or repetitive…” Additional considerations come into play where a fiscal statute is involved. These rules ought to be invoked in interpreting the Revenue Authority Act. The general position of the law is that fiscal legislation must be interpreted in a manner that reflects the legislature's intent, even if it leads to hardship for the taxpayer or loss to the fiscus. This was stated in the case of M. M. W. (Pvt) Ltd v Zimbabwe Revenue Authority HH 31-22 at p. 8-9: “I will, however, not lose sight of the fact that this is a fiscal case which has a different regime of statutory construction. In the case of Loewenstein v COT 1956 (4) SA 766 (FS) at 772 B Murray CJ quoted Lord Cairns in Partington v AG 21 LT p 375 as follows: ‘I am not at all sure that in a case of this kind – a fiscal case – form is not amply sufficient, because as I understand the principle of all fiscal legislation it is this: if the person sought to be taxed comes within the letter of the law, he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free however apparently within the law the case might otherwise appear to be. In other words, if there be an equitable construction, certainly such a construction is not admissible in a taxing statute, where you can simply adhere to the words of the statutes.” See also Zimbabwe Platinum Mines v Zimbabwe Revenue Authority SC 16-23. In CW v Commissioner of Taxes 1988 (2) ZLR 27 (HC), the court emphasised that a strict approach ought to be adopted when interpreting fiscal legislation. The court held as follows at p. 35-36: “As regards taxing Acts, which is what is under consideration in this case, in Canadian Eagle Oil Co Ltd v R [1945] 2 All ER 499 (HL) at 506 and 507 Viscount Simon LC said: “The late Rowlatt J, whose outstanding knowledge of this subject was coupled with a happy conciseness of phrase, said in Cape Brandy Syndicate v Inland Revenue Commissioners (7) at p 71: “. . . in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.” In W T Ramsay Ltd v Inland Revenue Commissioners [1981] 1 All ER 865 (HL) Lord Wilberforce at pp. 870 and 871 restated “some familiar principles” relating to fiscal legislation, the first one being — “1. A subject is only to be taxed on clear words, not on “intendment” or on the “equity” of an Act. Any taxing Act of Parliament is to be construed in accordance with this principle. What are “clear words” is to be ascertained on normal principles; these do not confine the courts to literal interpretation. There may, indeed should, be considered the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded.” It is important to note that the above approach applies when the fiscal legislation is clear and unambiguous in its interpretation. However, in cases of ambiguity, the contra fiscum rule must be applied. The rule stipulates that where there is ambiguity, fiscal legislation must be interpreted in a way that favours the taxpayer – see Zimbabwe Revenue Authority v Waringa Investments (Pvt) Ltd SC 84-13 at p. 7. Applying these principles to the present case, one observes that the Insolvency Act postdates the Revenue Authority Act. A clear conflict exists between the two statutes. The Insolvency Act imposes a moratorium on legal proceedings, including an enforcement action, in favour of a company under corporate rescue proceedings. If the Insolvency Act provides for such a moratorium, it is evident that the legislature intended to shield a company from obligations arising prior to corporate rescue proceedings, as well as from legal action that could jeopardise the survival of the business. This was made clear in the case Metallon Gold Zimbabwe (Private) Limited & Ors v Shatirwa Investments (Private) Limited & Ors SC 107-21 at pp 9 -12: “Corporate rescue, on the other hand, is seen as a measure which seeks to avoid the liquidation of a company in order to preserve it in a solvent state for the benefit of the company’s security holders and creditors including the company’s workers, as well as the society in which it exists. This approach is broader than the approach under judicial management, in that it seeks to cover the interests of all stakeholders who benefit from the existence of the entity concerned. ... In Koen and Anor v Wedgewood Village Golf & Country Estate (Pty) Ltd and Ors 2012 (2) SA 378 (WCC) at 383 the court stated that: “It is clear that the legislature has recognised that the liquidation of companies more frequently than not occasions significant collateral damage, both economically and socially, with attendant destruction of wealth and livelihoods. It is obvious that it is in the public interest that the incidence of such adverse socioeconomic consequences should be avoided were reasonably possible. Business rescue is intended to serve that public interest by providing a remedy directed at avoiding the deleterious consequences of liquidations in cases in which there is a reasonable prospect of salvaging the business of a company in financial distress, or of securing a better return to creditors than would probably be achieved in an immediate liquidation.” Corporate rescue proceedings are much more flexible and financially distressed company friendly than judicial management. The purpose is to facilitate the continued existence of a company in a state of solvency and to facilitate a better return on shareholders’ income....” Taking into account the purpose of corporate rescue, it follows that the process is intended to ensure that a company is resuscitated to financial profitability. Given that the first respondent’s claims were considered during the corporate rescue plan deliberations and rejected by the corporate rescue practitioner, the first respondent cannot now seek to challenge the rejection of its claim. In any event, the provisions of the Insolvency Act take precedence. Consequently, the first respondent’s submissions lack merit, and it cannot lawfully refuse to issue a TCC. The applicant’s claim, therefore, has merit. WHETHER THE APPLICANT HAS SATISFIED THE REQUIREMENTS FOR THE DECLARATORY ORDER SOUGHT. Having disposed of the first issue, it is now necessary to consider whether the applicant has satisfied the requirements for a declaratory order. The requirements for such an order are settled having been articulated by this court and other superior courts in various decisions. I set out the requirements below for completeness. The starting point is the High Court Act [Chapter 7:06]. Section 14 of the High Court Act [Chapter 7:06] provides as follows: “The High Court may, in its discretion, at the instance of any interested person, inquire into and determine any existing, future or contingent right or obligation, notwithstanding that such person cannot claim any relief consequential upon such determination.” In discussing the prerequisites to the granting of a declarator, the Supreme Court in the case of Johnsen v Agricultural Finance Corp 1995 (1) ZLR 65 (S) p. 73 held that: “The condition precedent to the grant of a declaratory order under s 14 of the High Court of Zimbabwe Act 1981 is that the applicant must be an “interested person”, in the sense of having a direct and substantial interest in the subject matter of the suit which could be prejudicially affected by the judgment of the court. The interest must concern an existing, future or contingent right. The court will not decide abstract, academic or hypothetical questions unrelated thereto…. At the second stage of the enquiry, the court is obliged to decide whether the case before it is a proper one for the exercise of its discretion under s 14 of the Act. It must take account of all the circumstances of the matter.” The same position was followed by the High Court in the case of Recoy Investments (Pvt) Ltd v Tarcon 2011 (2) ZLR 65 (H) p. 70 F-G it was held that: “It is trite that an existing dispute is not a pre-requisite for the making of a declaratory order and the court is not precluded from granting a declaratory order on the basis that there is no dispute. However, the court will not exercise its discretion where the applicant has, in seeking a declaratory order, raised abstract, hypothetical or academic questions. The applicant must have some tangible and justifiable interest in relation to an existing future or contingent right or obligation which will flow from the grant of the declaratory order. A person seeking a declaration of rights must set forth his contention as to what that alleged right is. He must also show that he has an interest in the right. Inherent in the concept of a right is the idea that it, the right, resides in a determinate person and the persons interested in the right are those in whom it inheres on against whom it avails” See also Milani & Anor v South African Medical & Dental Council & Anor 1990 (1) SA 899 (T) at 902G-H, Mpukuta v Maker Insurance Pool & Ors 2012 (1) ZLR 192 (H), Munn Publishing (Pvt) Ltd v ZBC 1994 (1) ZLR 337 (S) at 343E to 344E. Clearly, the applicant’s claim cannot be regarded as abstract, hypothetical, or academic. The declaratory order sought relates to issues directly affecting the applicant’s business interests. The applicant has demonstrated a justifiable interest in obtaining TCC, as articulated in the founding affidavit, which concerns its profitability and compliance with regulatory requirements imposed by authorities or local authorities. The applicant, through the corporate rescue practitioner, has established a right to the issuance of a TCC. This Court is therefore satisfied that the requirements for granting the declaratory order sought have been met. COSTS In deciding the issue of costs, the general rules regarding costs were taken into account. In the case of Crief Investments (Pvt) Ltd & Anor v Grand Home Center (Pvt) Ltd & Ors HH 12-18 it was held as follows: “The general rule is that costs follow the event, in other words, the successful party is usually awarded costs. The rationale for this principle is that the successful litigant should be indemnified from expenses which he/she incurred by reason of being unjustifiably compelled to either initiate or defend litigation. This rule should only be departed from when good grounds are shown to exist.” Similarly, in Mahembe v Matambo HB 13-03 at p. 2, the court stated that: “The general rule is that costs follow the event or put in another way success carries costs. The rationale for this principle is that the successful litigant should be indemnified from expenses which he incurred by reason of being unjustifiably compelled to either initiate or defend litigation. This rule should only be departed from where good grounds are shown to exist.” Taking into account the ordinary rules governing costs in proceedings before this Court, I discern no compelling reason to deviate from the established principles. The applicant was compelled to incur expenses in persuading the tax authorities that, under the circumstances of this case, a company under corporate rescue—such as itself—may be exempted from certain tax obligations pursuant to a duly approved corporate rescue plan. The applicant was entitled to assert its legal rights, which accrued primarily under the provisions of the Insolvency Act. In the circumstances, equity demanded that costs follow the event. Accordingly, the costs of these proceedings were to follow the result. It is for this reason that the order issued on 20 February 2025 included an order of costs. DISPOSITION Based on the foregoing analysis, I found no reason to decline the applicant’s request for the order sought. The applicant satisfied the requirements for a declaratory order. I was satisfied that, in the circumstances of this case, the first respondent could not refuse to issue the applicant a TCC when it had been aware, at all material times, that the applicant was under corporate rescue proceedings and had even participated in them. The decision was grounded in the purpose of corporate rescue proceedings, which is to safeguard the business interests of a struggling company. The objectives of the Insolvency Act, which postdates the Revenue Authority Act, would be defeated if enforcement authorities imposed unreasonable conditions without regard for the legislative intent of the Insolvency Act. Accordingly, for these reasons, I granted the order set out at the outset of this judgment. Maguchu & Muchada Business Attorneys, applicant’s legal practitioners Sinyoro and Partners, first respondent’s legal practitioners

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PACIFIC CIGARETTES COMPANY (PVT) LTD v THE ZIMBABWE REVENUE AUTHORITY and Another (166 of 2025) [2025] ZWHHC 166 (20 February 2025)

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PACIFIC CIGARETTES COMPANY (PVT) LTD v THE ZIMBABWE REVENUE AUTHORITY and Another (166 of 2025) [2025] ZWHHC 166 (20 February 2025)

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