Court name
Supreme Court of Zimbabwe
Case number
SC 20 of 2007
Civil Appeal 322 of 2006

Reserve Bank of Zimbabwe v Sibanda and Another (22/06) (SC 20 of 2007, Civil Appeal 322 of 2006) [2007] ZWSC 20 (07 October 2007);

Law report citations
Media neutral citation
[2007] ZWSC 20














DISTRIBUTABLE
(23)





Judgment
No. SC. 20/07


Civil
Appeal No. 322/06








RESERVE
BANK OF ZIMBABWE v (1) WESLEY SIMBA
SIBANDA (2) THE MASTER OF THE
HIGH COURT








SUPREME
COURT OF ZIMBABWE


ZIYAMBI
JA, MALABA JA & GARWE JA


HARARE, JUNE 19 &
OCTOBER 8, 2007








D S Mehta, for
the appellant





S J Chihambakwe,
for the first respondent





No appearance for the
second respondent








ZIYAMBI JA: For the purposes of this appeal the relevant facts are
that on 24 March 2004 the First National Building Society (“FNBS”)
was placed under provisional liquidation and Mr David John Scott
appointed provisional liquidator. Thereafter, on 25 January 2006,
at
a meeting of the creditors of FNBS it was decided that Scott should
be appointed final liquidator. On 13 September 2006 there
was a
further meeting of creditors and contributories at which Scott was
dismissed as liquidator and the first respondent appointed
as final
liquidator of FNBS. Some of the creditors, dissatisfied with that
decision, lodged an appeal to a Judge in Chambers in
terms of s 219
of the Companies Act [Chapter 24:03]. That appeal is yet to
be heard.







On 24 October 2006, the appellant wrote to the Master, drawing his
attention to the peremptory provisions of s 57(1)(b) of the Banking
Act [Chapter 24:20] (“the Act”) and pointing out that the
appointment of the first respondent as liquidator was irregular.
S57(1) provides as follows:


“57
Special provisions relating to winding up or judicial management
of banking institution







  1. Notwithstanding
    anything to the contrary in the Insolvency Act [Chapter6:04]
    or the Companies Act [Chapter 24:03] –








  1. The
    Reserve Bank shall have the right to apply to the High Court for –









    1. the
      winding up of any banking institution; or










    1. an
      order placing any banking institution under judicial management or
      provisional judicial management in terms of the Companies
      Act
      [Chapter 24:03];









and the Reserve Bank shall have the right to oppose any
such application made by any other person;







  1. no
    person other than a person recommended by the Reserve Bank
    shall
    be appointed as provisional liquidator, provisional judicial
    manager, liquidator or judicial manager of a banking institution.”
    (My emphasis)








(It was not disputed that FNBS was a banking institution by virtue of
General Notice 101 of 2005 published in the Government Gazette
of 11
March 2005). Paragraphs 4.7 - 5.2 of the letter under mention read
as follows:







“4.7
The consequences of the irregular appointment are as follows:









    1. The
      purported convening of the Second Creditors Meeting schedule (d)
      for the 2006 is null and void as Mr Sibanda had no capacity
      at law
      to so convene this meeting.








(b)
 All acts done in his purported capacity as Liquidator of
FNBS            are
null and void on   the same account;







(c)
There is therefore no Liquidator at law   and it is
necessary that            steps
be taken to make an appropriate appointment, and






(d)  In the circumstances it follows that Mr Davis (sic)
Scott      his status as
  Provisional Liquidator of FNBS until       such
a time as a Liquidator is properly   appointed.







    1. In
      the present case it is our respectful submission that the
      recommendations of the Reserve Bank of Zimbabwe recommend the
      appointment
      of the liquidator as required by law;










    1. In
      conclusion we urge the speed(y) regularization of the current
      situation and wish to advise that in the event that the position
      remains unresolved it is the intention of the Reserve Bank to
      enforce its rights of the law (sic).”















On 25 October 2006 the first respondent convened a second meeting of
creditors at the High Court and the Master, notwithstanding
the
contents of the letter and a verbal objection raised by the appellant
at the meeting, overruled the objection and allowed creditors
to
prove their claims to the first respondent.




Thereafter, on the
same date, the registration of FNBS as a building society in terms of
the Building Societies Act was cancelled
by the Registrar of Building
Societies. The first respondent nevertheless continued to act as
liquidator and the appellant filed
an “urgent” Court application
to the High Court on 3 November 2006, seeking the following order:







“TERMS OF FINAL ORDER SOUGHT



That you show cause to this Honourable Court sitting at
Harare why a final order should not be made on the following terms –








    1. The
      appointment of Mr Wesley Simba Sibanda a Liquidator of First
      National Building Society (in liquidation) and the first and
      second
      meetings of creditors held on 13 September 2006 and 25 October 2006
      is hereby declared null and void;












    1. The
      Master of the High Court is directed to properly appoint a
      Liquidator for First National Building Society (in liquidation)
      and to give effect to the provisions of s57(1)(b) of the
      Banking Act (Cap24:20).












    1. The
      costs of this application shall be costs of the liquidation.















INTERIM RELIEF GRANTED


     That
pending confirmation or discharge of this provisional order:







  1. The
    First respondent be and is hereby interdicted from conducting any
    further duties as liquidator of First National Building Society;








  1. The
    second respondent is directed not to sanction any further actions by
    the first respondent, as liquidator, pending a proper appointment
    of
    such liquidator;








  1. Mr
    David Scott of Price Waterhouse Coopers is reinstated as Provisional
    Liquidator of First National Building Society (in liquidation)
    pending a proper appointment of the Liquidator.”















The learned Judge in the court a quodismissed the application
with costs. He considered that it was not urgent, that the
appointment of the first respondent as liquidator
was not unlawful
and that the appellant was mala fidein bringing the
application, piqued by the fact that it had failed to bring about the
removal of the first respondent as liquidator.







On the question of the unlawfulness of the appointment of the first
respondent as liquidator, the learned Judge said:



“The
applicant was clearly correct in that s 57(1)(b) of the Banking Act
as read with s 3(3)of the Banking Act and General Notice 101
of 2005
provided that no person other than a person recommended by the
applicant shall be appointed as provisional liquidator or
liquidator
of a banking institution or a building society. It seems to me,
however, that the particular circumstances of this case
limit the
application of these provisions of the law. The first limitation
pertains to the fact that FNBS is no longer a banking
institution or
building society. Its licence was revoked by the applicant. It
means therefore that the appointment of the liquidator
in this case,
is not governed by the provisions of the Banking Act. It seems to me
that the appointment of a liquidator in this
case would be subject to
the provisions of the Insolvency Act and the Companies Act only.”














It seems to me that in arriving at this conclusion, the learned Judge
misdirected himself. The unlawful act of the Master in appointing
the
first respondent as liquidator took place on 13 September 2006, more
than a month before the licence was revoked. Thus, at the
time of
the revocation of the licence, FNBS was a building society in terms
of the Act, albeit in liquidation. Accordingly, the
appointment of
the liquidator was governed by the provisions of the Act and not the
Companies Act and the Insolvency Act as found
by the learned Judge.







The second error made by the learned Judge was to swallow the
emotional bait laid in the first respondent’s papers. A very
emotional
and moral case was presented for the retention of the first
respondent as liquidator. However, even assuming that there is merit
in the averments made against the appointment of Mr Scott as
liquidator (and I make no judgment on this issue) one would still be
left with the question how does one get around the peremptory
provisions of s 57(1)(b) of the Banking Act? In this regard, the
learned
Judge said:



“It
also seems to me that the application of the provisions of the
Banking (Act) in this matter would be limited by the unique nature
of
this case in that the applicant is wearing three hats. It is an
umpire, regulator and creditor. From the history of this case,
it is
fairly obvious that the applicant has assumed the position of what is
commonly referred to as big brother and it appears to
me, with due
respect, that the applicant has literally assumed that approach
throughout this case. As an example, my mind was boggled
when one
takes into account the huge expense the applicant had incurred in
pursuance (of) a principle. The principle being that
it had to be
approached for a recommendation of the appointment of a liquidator.
One wonders whether in pursuit of that principle,
the applicant is
exercising the three functions of creditor, umpire and regulator in a
judicious manner. It seems to me that the
applicant’s
bona
fides
would be put to doubt, more particularly if one considers
its rushed decision to cancel FNBS’s licence soon after its
objection
to the appointment of the first respondent was overruled.
One can understand why in his opposing affidavit, the first
respondent
submitted that the totality of the applicant’s conduct
clearly shows vindictiveness, bias, unreasonableness, mala
fides,
improper motive, abuse of authority and a clear disregard
of what the legislature intended section 57 of the Banking Act to be
used.”










Here again the learned Judge misdirected himself. The provisions of s
57 of the Act apply notwithstanding anything to the contrary
contained in the Insolvency Act or the Companies Act. Thus whether or
not the appellant was wearing three hats or one was not the
issue.
The issue was whether the appointment of the first respondent was in
compliance with the provisions of s 57 of the Act and
the obvious
answer is that the first respondent not being a person recommended by
the Reserve Bank (“RBZ”), his appointment was
in contravention of
the Act and, consequently, void.




As it was put to
counsel for the first respondent the hearing of the appeal,
although it is the Master to whom the Act entrusts the power to
appoint a liquidator, that power to appoint
is limited by the
requirement of recommendation by the RBZ. Thus there may be ten
people recommended or merely one. If there are
ten recommendations
by the RBZ, the Master may appoint one of the ten. If only one
person has been recommended he may only appoint
that person. And if
no recommendation has been made (by the RBZ) he may not appoint a
person of his choice or one recommended by
some person or body other
than the RBZ. The wording of the Act is clear.







This Court can, therefore, come to no other conclusion than that the
appointment of the first respondent as liquidator of FNBS was
made in
contravention of s 57(1)b) of the Banking Act and is therefore null
and void.







I turn now to consider the remedy sought by the appellant. This
appeal was against the failure by the court a quoto grant a
provisional order. Normally the grant of a provisional order pending
confirmation on the return day would be regarded
as an interlocutory
matter but in this case the effect of the dismissal of the
application was to grant a final order. In the absence
of an
interdict, so we are informed, the first respondent continues to act
as liquidator of FNBS.







It seems to me that a declaration of the nullity of the appointment
of the first respondent would point the parties in the right
direction. It would mean that a liquidator would have to be
appointed, bearing in mind the provisions of s 57 (1)(b) of the Act.







There is one other matter deserving some mention. The court a
quo
alluded to the fact that the appellant had an alternative
remedy, in that he could apply to be joined as a party to the appeal
lodged
by the creditors in case No. HC 417/06, which appeal was still
pending at the time of the hearing of the application. The
implication
is that the issue of the unlawfulness of the appointment
was sub judice,as a decision on that issue was pending before
the High Court. However, a perusal of the notice of appeal filed
reveals that the
issue of the unlawfulness of the appointment by
reason of its contravention of s 57 of the Act is not raised in the
grounds of appeal.
Thus the matter is not sub judice. Further,
the Act does not provide an avenue for appeal by the RBZ in the event
of an occurrence such as in this case. It therefore
seems to me that
the appellant’s approach to the High Court for redress cannot be
impugned.







Accordingly, the appeal is allowed with costs to be the costs of
liquidation.







It is declared that the appointment of the first
respondent as liquidator of FNBS was unlawful and the appointment is
therefore null
and void.
















MALABA JA: I agree
















GARWE JA: I agree
















Costa & Madzonga, appellant’s legal practitioners


Chihambakwe, Mutizwa
& Partners
, first respondent’s legal practitioners