Court name
Supreme Court of Zimbabwe
Case number
SC 36 of 2005
Civil Appeal 67 of 2005

Trust Holdings Ltd. v Reserve Bank of Zimbabwe and Others (67/05) (SC 36 of 2005, Civil Appeal 67 of 2005) [2005] ZWSC 36 (04 September 2005);

Law report citations
Media neutral citation
[2005] ZWSC 36



















DISTRIBUTABLE
(28)


Judgment
No. SC. 36/05


Civil
Appeal No. 67/05








TRUST
HOLDINGS LIMITED v





(1)
RESERVE BANK OF ZIMBABWE


(2)
PETER L. BAILEY


(3)
ZIMBABWE ALLIED BANKING GROUP LIMITED








SUPREME
COURT OF ZIMBABWE


SANDURA
JA, MALABA JA & GWAUNZA JA


HARARE,
MAY 3 & SEPTEMBER 5, 2005








M
P Mahlangu
, for the appellant





E
T Matinenga,
for the first and second respondents





E
I Manikai
, for the third respondent





SANDURA
JA: This is an appeal against a judgment of the High Court which
dismissed with costs the appellant’s application for
an interdict
and other relief. The appeal raises the same issues which were
raised, and determined by this Court, in
Jeffrey
Mzwimbi and Ors v Reserve Bank of Zimbabwe and Ors

SC 35-05 (“the
Royal
Bank
case”).





The
background facts are as follows. The appellant (“Trust Holdings”)
is the sole shareholder in Trust Bank Corporation Limited
(“Trust
Bank”). On 23 September 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 Trust Bank,
placing it under the management of the second respondent
(“the
curator”) for a period of six months.





About
a month later, on 28 October 2004, the RBZ stated in its
monetary policy review statement that all troubled banking
institutions
would be amalgamated in order to form an institution
called the Zimbabwe Allied Banking Group.






Thereafter, on 14 January
2005, the Troubled Financial Institutions (Resolution) Act
[Chapter 24:28] (“the Troubled Financial Institutions
Act”) was promulgated. The Act provided for, inter alia,
the administration of troubled financial institutions, and the
formulation and implementation of schemes of resolution in respect
of
such institutions.





Five
days later, on 19 January 2005, the curator wrote to Trust
Holdings as follows:






“In terms of the Troubled
Financial Institutions (Resolution) Act, Zimbabwe Allied Banking
Group Limited (ZABG) will purchase all the
assets of Trust Bank
Corporation Limited (TBC) as at 1 January 2005 at full market
value as already assessed by professional
valuers …”.





On
the following day, 20 January 2005, the curator and the third
respondent (“the ZABG”) concluded an agreement of sale
in terms
of which the curator sold to the ZABG all the assets of Trust Bank.





Thereafter,
on 1 February 2005, Trust Holdings filed an urgent chamber
application in the High Court seeking an interdict and
other relief.
The application was dismissed with costs on 9 March 2005.
Aggrieved by that result, Trust Holdings appealed
to this Court.






As was the position in the
Royal Bank case, the present appeal may be disposed of on the
basis of two of the several issues that were argued before us. The
first is
whether the curator acted lawfully when he sold the assets
of Trust Bank to the ZABG; and the second is whether Trust
Holdings
had the right to file the urgent chamber application without
the curator’s permission. To those issues I now turn.





It
was common cause that when the curator sold the assets he did not act
in terms of the Troubled Financial Institutions Act.
It was also
common cause that the transfer of the assets was not in compliance
with s 25(1) of the Banking Act, which provides
for the
amalgamation of banking institutions.





However,
it was argued on behalf of the respondents that when the curator sold
the assets he acted in terms of s 55(2)(h) and
s 55(2)(h)(ii)
of the Banking Act.





In
terms of s 55(2)(h) of the Banking Act, a curator has the power:






“to dispose, by public auction,
tender or individual negotiation, of any asset of the banking
institution concerned …”.






It
was submitted that since the curator had such power he could sell all
the assets of the banking institution concerned. This argument
was
relied upon in the
Royal
Bank
case supra
but was rejected by this Court. At p 7 of the cyclostyled
judgment this Court said:





“That
submission cannot be accepted because the principal objective 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 curator’s power to sell
any
asset or branch of the banking institution concerned could only be
exercised in order to achieve that objective.






… placing
a banking institution under the management of a curator is akin to
placing a company under a judicial manager, the principal
objective
being to remove the causes of the financial difficulties experienced
by the company so that the company can function normally.





In
addition, the proviso to s 55(1)(g) of the Banking Act is
significant. It states as follows:





‘… if
at any time he (the curator) is of the opinion that continued
curatorship will not enable the banking institution to become a
successful
concern, he shall advise the Reserve Bank accordingly.’







That … is a clear indication
that the principal objective of the curatorship is to enable the
banking institution to become a successful
concern. Such an
objective cannot be achieved by selling all the assets of the banking
institution.”





The
above comments apply to the present case with equal force.






Section 55(2)(h)(ii) of
the Banking Act, relied upon by counsel for the ZABG, for the
proposition that the curator had the
power to dispose of all the
assets of Trust Bank, 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”.





This
provision was relied upon in the
Royal
Bank
case supra,
but was rejected by this Court. At p 8 of the cyclostyled
judgment this Court said:






“The difficulty with this
provision is that it refers to s 228 of the Companies Act, which
does not at all deal with the disposal
of 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
the Companies Act, which provides that
the directors of a company are not empowered, without the approval of
the company in general
meeting, to dispose of all or the greater part
of the assets of the company.






… that
is highly speculative because there is no basis for the conclusion
that that is the section of the Companies Act which the 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 company’s assets.”






The
above comments apply to the present appeal with equal force.






Accordingly,
s 55(2) of the Banking Act does not authorise a curator to sell
all the assets of a banking institution. It
follows that the
curator acted unlawfully and that the sale and transfer of the assets
of Trust Bank to the ZABG were null and void,
and of no force or
effect.





I
now come to the second issue, which is whether Trust Holdings had the
right or power to file the urgent chamber application without
the
curator’s permission. I do not think it had. Section 54(1)
of the Banking Act makes that clear. It reads as follows:





“The
issue of a direction in terms of section fifty-three shall have the
effect of suspending the powers of every director, officer
and
shareholder of the banking institution concerned, except to the
extent that the curator may permit them to exercise their powers.”





It
was common cause that the urgent chamber application was filed
without the curator’s permission. It follows that the application
was not properly before the High Court and should not have been
entertained.





Another
reason why the application was not properly before the High Court is
found in s 55(4) of the Banking Act, which reads
as follows:






“Any person who is aggrieved
by any decision or action taken by a curator may appeal against it to
the Reserve Bank.”





Commenting
on this section in the
Royal
Bank
case supra,
this Court said the following at p 10 of the cyclostyled
judgment:





“The
appellants should have appealed to the RBZ against the curator’s
decision to sell Royal Bank’s assets to the ZABG.
The fact
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
the
appellants in the High Court.





It,
therefore, follows that if the appellants had complied with the
provisions of the Banking Act in challenging the curator’s
actions,
they would not have been without a remedy.”





These
comments apply with equal force to the present appeal.





In
the circumstances, whilst it is clear beyond doubt that the curator
unlawfully sold and transferred the assets in question to
the ZABG,
the appeal cannot succeed for the reasons given above.





Finally,
as far as costs are concerned, an important consideration is the fact
that the respondents acted unlawfully. They did
not comply with the
provisions of the Troubled Financial Institutions Act or the Banking
Act. In my view, this is an appropriate
case in which this Court
should mark its disapproval of the unlawful conduct of the
respondents by not making any order as to costs.





In
the circumstances, the appeal is dismissed with no order as to costs.














MALABA
JA: I agree.














GWAUNZA
JA: I agree.














Gill,
Godlonton & Gerrans,

appellant's legal practitioners


Atherstone
& Cook
, first and
second respondents' legal practitioners


Dube,
Manikai & Hwacha
,
third respondent's legal practitioners