The High Court has dismissed an application to place RioZim Limited under corporate rescue, with the presiding judge labelling the union leading the push a ‘busybody’ and declaring the entire legal action an ‘abuse of the court process’.
A ‘busybody’ in law refers to someone who meddles in others’ affairs without a legitimate concern.
Justice Gibson Mandaza delivered the ruling on Tuesday, finding the Zimbabwe Diamond and Allied Minerals Workers union (ZDAMWU) lacked legal standing to bring the case against the mining giant.
ZDAMWU brought the issue alongside two individuals, Precious Mwanza and Owen Kapeta, who argued that RioZim was in financial distress.
The applicants claimed that the company’s liabilities exceeded its assets and that the “tragic death of the majority shareholder” had left the Zimbabwe Stock Exchange-listed miner without sufficient capital injection or shareholder support.
They also argued that corporate rescue was necessary to preserve jobs and safeguard the company’s assets, including gold mines Renco and Cam and Motor and Murowa Diamond Mine.
RioZim opposed the application, arguing that ZDAMWU was a general industry body and not a registered trade union specifically representing RioZim’s own employees.
RioZim further contended that the applicants had failed to properly notify all “affected persons,” such as creditors and shareholders, which is a mandatory procedural step under the Insolvency Act.
The law defines an “affected person” as someone who has a direct legal or financial stake in the company.
Justice Mandaza centred his decision on the issue of legal standing.
He noted that while the Insolvency Act allows trade unions to initiate rescue proceedings, it specifies that the union must represent employees of the specific company in question.
The judge cited Supreme Court precedent involving Metallon Gold, which established that being a general union for the mining industry is not enough to satisfy the statutory requirements for a specific corporate rescue case.
“The Insolvency Act does not provide for a registered trade union in the industry, but specifically provides for one representing employees of the company,” Justice Mandaza ruled.
“I hold that the first applicant lacks locus standi to pursue these proceedings. The first applicant is just a ‘busybody’ in the strictest sense of the word. It has no direct and substantial interest in the matter.
“It does not fit into the definition of an affected person as contemplated by the Insolvency Act.
“The application is an abuse of the court process.”
Before reaching the merits of the case, the court also dismissed several “points in limine” raised by the applicants.
The union had attempted to have RioZim’s opposition struck off, claiming the company’s board resolution was invalid and that the directors were divested of their powers once the application was filed.
Justice Mandaza rejected these arguments, affirming that a company has a fundamental right to defend itself against being placed under supervision.
Despite the victory for RioZim, the court declined to award punitive costs against the union.
While the miner argued the application was “frivolous and vexatious,” Justice Mandaza ruled that the case raised important legal issues and that access to justice should not be deterred by the threat of heavy financial penalties.
He ordered that each party bear its own legal costs.
RioZim’s performance has been hampered by a challenging macroeconomic environment, including limited local lending capacity and difficulties in accessing external credit due to perceived country risk.
A key issue for RioZim stems from a geological shift at its flagship Cam & Motor Mine. In 2019, the ore changed from oxide to a refractory sulphide, necessitating a substantial US$35 million capital investment for infrastructure changes that the company could not self-finance.
Extensive efforts to secure long-term funding, both locally and internationally, proved fruitless.
Local lenders offered only short-term loans, while external funders were deterred by a lack of understanding of the country’s circumstances and perceived country risk, even when funding was secured against gold exports through an agreement with Fidelity Gold Refineries.
The reliance on short-term financing for a capital-intensive program has severely disrupted RioZim’s working capital cycle and diverted focus from crucial ancillary infrastructure.
While new BIOX and flotation plants were commissioned in April 2022, a lack of funds prevented necessary pit optimisation and upgrades to associated critical infrastructure, such as crushers, mills, tanks, pumps, and allied piping.
This imbalance has led to inconsistent ore feed, reduced productivity, accelerated equipment wear and tear, and increased maintenance needs.
Furthermore, persistent funding constraints have hindered normal mine development, exploration activities, and efforts to increase the resource base and mine life, ultimately leading to a drop in both grade and recoveries.
In response to these capitalisation challenges, RioZim has launched a capital-raising initiative to recapitalise the business and stabilise production and has since reported improved production at some of its gold operations.-herald
