No. SC. 35/05
Appeal No. 42/05
JEFFREY MZWIMBI (2) DURAJADI SIMBA
ROYAL BANK ZIMBABWE LIMITED v
RESERVE BANK OF ZIMBABWE
ZIMBABWE ALLIED BANKING GROUP
ROBERT McINDOE, THE CURATOR OF ROYAL
BANK ZIMBABWE LIMITED
COURT OF ZIMBABWE
JA, MALABA JA & GWAUNZA JA
MARCH 7 & SEPTEMBER 5, 2005
Moyo, for the appellants
K Mushore, for the first and third respondents
I Manikai, for the second respondent
JA: This is an appeal against a judgment of the High Court which
dismissed with costs the appellants application for
and other relief.
background facts are as follows. The first appellant (Mzwimbi)
is the chief executive officer of the third appellant
Bank) and the second appellant (Simba) is an executive
director of Royal Bank. Mzwimbi and Simba hold forty-five
percent of the shares in Royal Bank.
4 August 2004 the first respondent (the RBZ), acting in
terms of s 53(1) of the Banking Act [Chapter 24:20]
(the Banking Act), issued a written direction to Royal Bank,
placing it under the management of the third respondent
curator) for a period of six months. That period was
of the Banking Act reads as follows:
(a) the Reserve Bank considers
that a banking institution is in an unsound financial condition and
is not operating in accordance
with sound administrative and
accounting practices and procedures, adhering to proper
risk-management policies; or
banking institution has failed to comply with the minimum financial
requirements prescribed in terms of this Act, and the Reserve
considers that it is unlikely to comply with them unless it is placed
the Reserve Bank may issue a
written direction to the institution placing the institution under
the management of a curator for such
period, whether definite or
indefinite, as in the Reserve Banks opinion will permit the
institutions condition to be remedied
his appointment, the curator examined the affairs and transactions of
Royal Bank before it was placed under curatorship,
23 September 2004 submitted a report to the RBZ. In that
report he alleged, inter alia, that Mzwimbi and Simba had
violated certain provisions of the Companies Act [Chapter 24:03]
(the Companies Act).
on 28 October 2004, the RBZ issued its Monetary Policy
Statement: 2004 Third Quarter Review (the monetary
statement), in which it announced the implementation of a
Troubled Bank Resolution Policy. The relevant paragraphs
the monetary policy statement read as follows:
3.29 With effect from January
2005, the Reserve Bank will implement a comprehensive Troubled Bank
Resolution (TBR) Policy, to decisively
deal with the troubled banks
who (sic) have failed to tread out of their difficulties.
following are the salient features of this framework:
amounts owed to the Reserve Bank by the troubled banks will be
converted into equity.
Special Purpose Vehicle (SPV) will be established to hold the equity
in the troubled banking institutions, acquired through
debt to equity.
shareholders will write down whatever is left of their shareholding,
if any, in line with assessed levels of under capitalisation
losses deemed to be a result of misappropriation and/or
safeguard the Central Banks independence and neutrality in
discharging its supervisory and surveillance roles, the SPV,
Allied Financial Services Ltd, will be a jointly owned entity between
Government, creditors, and depositors who would have
deposits into equity. The SPV is, thus, not a Reserve Bank-owned
troubled banking institutions will be amalgamated into one entity,
under the name Zimbabwe Allied Banking Group (ZABG), initially to
be managed by an appointed Management Board of turnaround and
integration experts, supported by a competent Management
stabilisation, Government and its partners can offload the shares in
ZABG to a wider base of owners, under indigenisation
programs that benefit a wider cross-section of the people of Zimbabwe
than is the case at present.
institutions amalgamated into the ZABG will be taken as Special
Business Units (SBUs), managed by the said experts at
SBUs will have one main board in order to ensure efficient and
effective co-ordination of strategy and alignment of operations.
coming to this policy position, immense preparatory work has been
done to ensure that there is a smooth transition and integration
the individual previously troubled banks into one entity.
Subsequently, in order to give
legal effect to the troubled bank resolution policy, the Troubled
Financial Institutions (Resolution)
Act [Chapter 24:28]
(the Troubled Financial Institutions Act) was promulgated on
14 January 2005. The Act provided for, inter alia, the
administration of troubled financial institutions, and the
formulation and implementation of schemes of resolution in respect
on 20 January 2005, the curator and the second respondent (the
ZABG) concluded an agreement of sale, in terms
of which the
curator sold to the ZABG all the assets of Royal Bank. The
appellants were not informed about the sale.
days later, on 26 January 2005, the legal practitioners acting
for the appellants wrote to the respondents as follows:
clients have been advised that public statements, advising the banks
customers, creditors, shareholders and other interested
been made to the effect that the bank is part of an institution known
as Zimbabwe Allied Banking Group, whereas the
correct position is
that the legal requirements for the amalgamation of banking
institutions as provided for in the Troubled Financial
(Resolution) Act and the Banking Act have not at all been pursued.
Requisite notices to former directors, creditors
have not been issued in terms of the Troubled Financial Institutions
Resolution Act. No confirmation application
has been made to a
judge of the High Court as is required in terms of that Act. No
amalgamation application has been made in terms
of the Banking Act.
Consequently, the highly publicised amalgamation of Royal Bank
with any other bank is manifestly unlawful.
are advised that notwithstanding the fact that no lawful amalgamation
has taken place in terms of the law, advertising signs of
have been removed from its premises and have been replaced by
advertising signs of Zimbabwe Allied Banking Group.
There is no
legal basis whatsoever for this action at this stage. Former
directors, shareholders, creditors and other interested
received no communication whatsoever regarding what is taking place.
You have displayed a brazen and contemptuous
disregard of their
interests and the law relating to amalgamation of banks.
all the circumstances, we have been instructed to demand, as we
hereby do, the legal basis on which the above have been done, failing
which our clients shall be left with no option but to seek the urgent
intervention of the High Court.
there was no substantive response to the above letter, the appellants
filed an urgent chamber application in the High Court
respondents on 31 January 2005, seeking a provisional order
calling upon the respondents to show cause why a final
not be made restraining them from, inter alia, using the
premises, motor vehicles and other assets of Royal Bank, and
setting aside any purported disposal or alienation of
the business or
assets of Royal Bank to the ZABG.
due course, the opposing and answering affidavits were filed and the
matter was heard on 7 February 2005. Since all the
papers had been filed, the matter was argued on the basis that what
was being sought by the appellants was a final order.
counsels submissions, the learned judge reserved his judgment.
About two weeks later, the learned judge dismissed
with costs. Aggrieved by that result, the appellants appealed to
several issues were argued in this appeal, I believe that the appeal
may be disposed of on the basis of two of those issues.
is whether the curator acted lawfully when he sold the assets of
Royal Bank to the ZABG; and the second is whether
had the right to file the urgent chamber application without the
curators permission. I will deal with these
issues in turn.
was common cause that when the curator sold the assets of Royal Bank
to the ZABG he did not act in terms of the Troubled
Institutions Act. It was also common cause that the transfer of
Royal Banks assets to the ZABG was not in compliance
s 25(1) of the Banking Act which provides for the amalgamation
of banking institutions.
it was argued on behalf of the respondents that in selling the assets
the curator had acted in terms of subs (2) of
s 55 of the
Banking Act. That subsection, in relevant part, reads as follows:
curator shall have the following powers, to the extent that he is
authorised to exercise them in terms of the direction under
(a) - (g)
(h) to dispose, by public
auction, tender or individual negotiation, of any asset of the
banking institution concerned, including
(ii) any asset for the disposal
of which an approval contemplated in section 228 of the
Companies Act [Chapter 24:03] would have been a
to take any action necessary for the administration or operation of
the banking institution concerned, including the
sale or closure of
any branch, agency, or other office of the institution
was common cause that in terms of his letter of appointment the
curator was authorised to exercise the powers set out in s 55
the Banking Act.
the circumstances, it was submitted on behalf of the respondents that
as the curator had the power to sell any asset or branch
Royal Bank he could lawfully sell all the assets of Royal Bank.
That submission cannot be accepted because the principal
in placing a banking institution under the management of a curator is
not to liquidate the institution but to enable it
to become a
successful concern. Accordingly, the curators power to sell any
asset or branch of the banking institution concerned
could only be
exercised in order to achieve that objective.
my view, placing a banking institution under the management of a
curator is akin to placing a company under a judicial manager,
principal objective being to remove the causes of the financial
difficulties experienced by the company so that the company can
addition, the proviso to s 55(1)(g) of the Banking Act is
significant. It states as follows:
at any time he (the curator) is of the opinion that continued
curatorship will not enable the banking institution to become a
concern, he shall advise the Reserve Bank accordingly.
in my view, is a clear indication that the principal objective of the
curatorship is to enable the banking institution to become
successful concern. Such an objective cannot be achieved by selling
all the assets of the banking institution.
was further submitted that in terms of s 55(2)(h)(ii) of the
Banking Act, which I have already set out in this judgment,
curator had the power to dispose of all the assets of Royal Bank.
Section 55(2)(h)(ii) empowers the curator to sell:
any asset for the disposal of
which an approval contemplated in section 228 of the Companies
Act [Chapter 24:03] would have been a prerequisite.
difficulty with this provision is that it refers to s 228 of the
Companies Act, which does not at all deal with the disposal
assets, but with the obligation of the court, after making a
winding-up order, to settle a list of contributories. Faced with
that difficulty, counsel for the second respondent submitted that for
s 228 this Court should substitute s 183(1)(b) of
Companies Act, which provides that the directors of a company are not
empowered, without the approval of the company in general
dispose of all or the greater part of the assets of the company.
my view, that is highly speculative because there is no basis for the
conclusion that that is the section of the Companies Act
legislature intended to refer to. In any event, there are other
sections of the Companies Act in terms of which some
type of approval
is a prerequisite to the disposal of a companys assets.
subs (2) of s 55 of the Banking Act does not authorise a
curator to dispose of all the assets of a banking
follows, therefore, that the curator acted unlawfully when he sold
the assets of Royal Bank to the ZABG.
In the circumstances,
the sale and transfer of the assets were null and void, and of no
force or effect.
now wish to consider whether the appellants had the right or power to
file the urgent chamber application without the curators
permission. Before answering that question, I wish to state that
there can be no doubt that the appellants had an interest or special
reason entitling them to sue the respondents. The assets unlawfully
sold and transferred to the ZABG belonged to Royal Bank,
unlawful sale and transfer of the assets adversely affected the value
of the shares held by Mzwimbi and Simba. The appellants,
had the requisite locus standi in judicio.
having said that, I do not think that the appellants could exercise
their power to sue the respondents without the curators
permission. I say so because of the provisions of s 54(1) of
the Banking Act. The section reads as follows:
issue of a direction in terms of section fifty-three shall have the
effect of suspending the powers of every director, officer
shareholder of the banking institution concerned, except to the
extent that the curator may permit them to exercise their powers.
was common cause that when the appellants filed the urgent chamber
application in the High Court they had not sought the curators
permission, and had not been permitted to file the application. In
the circumstances, there can be no doubt that the application
properly before the High Court and should not have been entertained.
there is another reason why the application was not properly before
the High Court. It is found in s 55(4) of the
which reads as follows:
person who is aggrieved by any decision or action taken by a curator
may appeal against it to the Reserve Bank.
appellants should have appealed to the RBZ against the curators
decision to sell Royal Banks assets to the ZABG.
that the unlawful sale took place with the approval of the RBZ would
not necessarily mean that the RBZ could not have objectively
determined such an appeal. In any event, any adverse decision given
by the RBZ in such an appeal could have been challenged by
appellants in the High Court.
therefore, follows that if the appellants had complied with the
provisions of the Banking Act in challenging the curators
they would not have been without a remedy.
the circumstances, whilst it is clear beyond doubt that Royal Banks
assets were unlawfully sold and transferred to the
ZABG, the appeal
I wish to consider the issue of costs. In this regard, an important
consideration is the fact that in disposing of the
assets in question
the respondents did not comply with the provisions of the Troubled
Financial Institutions Act or the Banking Act,
and therefore acted
unlawfully. In the circumstances, it seems to me that this is an
appropriate case in which this Court should
mark its disapproval of
the unlawful conduct of the respondents by making no order as to
appeal is, therefore, dismissed with no order as to costs.
JA: I agree.
JA: I agree.
appellants' legal practitioners
& Cook, first
respondent's legal practitioners
Manikai & Hwacha,
second respondent's legal practitioners
& Sibanda, third
respondent's legal practitioners