Zambian Airways loses assets

THE Lusaka High Court has dismissed defunct Zambian Airways’ application for stay of execution of the attachment order granted to National Airports Corporation Limited (NACL) over the airline’s assets.

According to the Daily Mail, This means that NACL can proceed to seize the airline’s assets, which include about 40 vehicles.

This is in a case where High Court Judge Prisca Nyambe early this year ruled in favour of NACL, which was claiming over US$2 million from Zambian Airways in unremitted passenger service charges, parking fees, ground, navigation and air handling services.

After the judgment in default of defence, Ms Justice Nyambe granted NACL an order of attachment, which restricted the airline from accessing, interfering with or disposing of any asset included in the order.

But Zambian Airways applied for stay of execution on grounds that since the company is in receivership, as at April 2, 2009, the assets no longer belonged to the defunct airline but to the receiver.

In her ruling signed on October 23, 2009 and obtained yesterday, Ms Justice Nyambe said from the evidence on record, it is not in dispute that the application for attachment arose from the default judgment after Zambian Airways failed to defend itself.

She said the interim attachment order was granted to NACL on March 13, 2009 before the appointment of the receiver.

“As of 23rd April 2009, the lawyer purporting to act for the receiver had no instructions from the receiver. To date, the record does not show any document or proof of the lawyer having been appointed to represent the receiver.

“As of 23rd April 2009, the evidence of the appointment of the receiver for Zambian Airways could not be produced before the court as the lawyer purporting to act for the receiver had not filed any document to that effect,” Ms Justice Nyambe said.
She granted the interim attachment order on March 13, 2009 and confirmed it on May 8, 2009.

Ms Justice Nyambe said from the evidence, it is clear that Zambian Airways’ assets, which were attached by the interim order, were not in the receiver’s possession at the time she granted the order.

She said according to law, the date of appointing the receiver should be deemed to be commencement of the winding up.

“At the time the order was confirmed, there was no evidence before court of the appointment of the receiver, or commencement of the winding up. These goods cannot be affected by the subsequent crystallisation,” Ms Justice Nyambe said.

She dismissed an argument by Zambian Airways lawyer Ngosa Simachela that any execution would not allow it to be commercially viable for creditors to secure the debts.

Other creditors Zambian Airways owes a total of US$5.9 million (K28 billion) are: Investrust Bank (US$1,484,336.18), Intermarket Bank Zambia Limited (US$1,440,620.93), and Development Bank of Zambia (US$3,014,006.68).

It also owes employees K3.4 billion in salary arrears.
Ms Justice Nyambe said the assets, which are subject of the attachment, do not fall under custody of the receiver, who was appointed after the order was granted.

“The floating charge cannot in law affect attached goods since the receiver had not yet taken possession of the subject goods at the time the order was granted,” she said.

Ms Justice Nyambe said the issue of NACL not being a secured creditor does not arise in the circumstances.

She said Zambian Airways directors, who irregularly sent Ms Simachela to court to represent the airline before the receiver was appointed, lacked authority to advance any arguments concerning the company’s assets.

“In fact, there is no evidence on record to indicate that the lawyer, who had been retained by the defendant (Zambian Airways), had authority to act on behalf of the receiver,” she said.

Ms Justice Nyambe said once the receiver was appointed, Zambian Airways directors or principals no longer had control over the assets or authority to decide on who should represent the receiver.

She said as regards to the issue of secured creditors or unsecured creditors, by section 346(1)(e), (f) of Cap 388, NACL ranks among the preferred creditors.

Ms Justice Nyambe said this is because NACL is a Government entity and the amounts became due before the winding up of Zambian Airways started.

She dismissed Ms Simachela’s submission that the appointment of the receiver constitutes special circumstances, which render it inexpedient to allow the execution to proceed.

“Put plainly this receiver could not take possession of the assets, the subject of this application, because the plaintiff (NACL) already had a judgement in its favour against which there has been no appeal.

“For the foregoing reasons, the defendant’s application is declined. The interim order of stay granted to facilitate hearing of this application is hereby discharged. The plaintiff is awarded the costs, if not agreed to be taxed,” Ms Justice Nyambe said.

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