Source: ‘RBZ assets can’t be attached’ | Herald (Top Stories)

Fidelis Munyoro-Chief Court Reporter

The Reserve Bank of Zimbabwe has breathed a sigh of relief after the High Court ruled that the central bank’s assets cannot be attached in a lawsuit over more than US$26 million in unsettled debt with a London-based grain and fertiliser exporter, Holbud Limited.

In its application, the RBZ sought an order declaring that its assets were subject to the provisions of the State Liabilities Act and therefore could not be attached.

 The Reserve Bank also argued that the amount claimed by Holbud under the arbitral award registered before the High Court was also the subject of the Reserve Bank (Debt Assumption) Act No 2 of 2015, and consequently was not subject to further execution. 

After hearing submissions from both parties’ counsel, Justice Webster Chinamora ruled in favour of the RBZ, agreeing with its legal position that its assets were protected by law and that it had never waived these rights in its dealings with Holbud.

 The judge was satisfied that the bank had shown a sufficient interest to make the present application for a declarater declaring the assets of the Reserve Bank of Zimbabwe subject to the protection accorded by the State Liabilities Act.

In terms of the State Liabilities Act as read with the Reserve Bank of Zimbabwe Act, the RBZ’s assets cannot be the subject of a writ of execution, meaning that no one can attach them for sale to satisfy a debt.

Holbud sought to argue that RBZ waived its right to this protection from the State Liabilities Act, so Justice Chinamora had to determine whether such waiver had been proved. 

The court was referred to specific clauses as forming the basis of the claim for waiver of the protection provided by the State Liabilities Act. But on examination of the clauses in question, Justice Chinamora found nothing in them that founded a claim for waiver. 

 He found that the commitment by Holbud to pay funds into the RBZ’s offshore accounts did not amount to either an express or tacit waiver of rights accorded to the bank by the law. 

“Even the undertaking to pay the debt using exports proceeds or the applicant’s(RBZ) other resources is not tantamount to a waiver,” said Justice Chinamora. “Still less is the clause that enables the respective parties to approach the High Court for specific performance or other relief.” 

The court noted that the clauses relied on by Holbud did not mention any waiving of the protection. The law placed the onus on Holbud to show that the Reserve Bank had consciously abandoned its right, whether expressly or by conduct plainly inconsistent with an intention to enforce it. 

“But Holbud had not shown there was such a waiver to make the provisions of the State Liabilities Act inapplicable.

 Justice Chinamora said in light of the legal position, it could not be argued with conviction that the RBZ deliberately waived all rights and benefits accruing from the protection derived from the State Liabilities Act and so Holbud could not levy execution on the assets of the Reserve Bank of Zimbabwe placing reliance on any waiver.

 Justice Chinamora also ruled that the registration of the arbitral award puts paid to the submission that such award was not a debt covered by the RBZ (Debt Assumption) Act.

Justice Chinamora was of the view that the resolution of the dispute still revolved around the provisions of the State Liabilities Act.

 “I need not mention, but will do so for the sake of clarity, that what is proscribed by the State Liabilities Act is execution or attachment of property of the State.” Since Holbud had not demonstrated that the attached property did not qualify as property of the State, there was no reason for excluding it from the provisions of the State Liabilities Act.

“Since I have come to this conclusion, I will not make a pronouncement on whether or not the issuance of Treasury Bills by the State satisfied the (Holbud)’s claim. 

The ruling meant that there was no need for a stay of execution of the attachment order since no one could levy execution on a property using a null and void writ.

The legal row revolves over payment problems to Holbud. Holbud claimed to have received two Treasury Bills totalling US$40 246 217, which matured on March 25, 2017 and February 24, 2017, with the proceeds of the matured bills were to be paid to Holbud’s bankers in the United Kingdom.

As a paying agent of Zimbabwe authorities, the RBZ faced certain challenges when it came to repatriate the proceeds of the matured bills into offshore accounts of Holbud as instructed.

The RBZ and Holbud then entered into an arrangement whereby Holbud availed to the RBZ part of the proceeds of the Treasury Bills amounting to US$26 million. The RBZ would in turn avail the funds for lending to eligible entities under a finance facility before and after exports on condition that half of the export proceeds would be credited to the RBZ’s nominated nostro account for subsequent payment of its obligations to Holbud.

The RBZ agreed to settle the debt by paying four instalments of US$6 500 000 between January and September 2018, but failed to fulfil its contractual obligations leading to the matter being referred to an arbitrator.

Retired judge Justice George Smith was chosen as arbitrator and ruled in favour of the London-based company, ordering the RBZ to settle the debt. The award was successfully registered at the High Court and the company then obtained the writ to attach the RBZ assets, which has now been declared null and void.