Back To Basics: Cabs & Ors V Penelope Douglas Stone & Anor: Case No. SC 15/21

Commercial Litigation & Arbitration

The Applicants, Stone and Beattie, had a USD savings account with CABS which was opened in 2011. As at the end of October 2016, their account had a credit balance of US$142 000.00. On 31st October 2016, the President of Zimbabwe introduced bond notes and coins. He then declared that they would be legal tender in all transactions as if each unit of a bond note shall be deemed to be equivalent to and exchangeable for one United States cent. In trying to avert their money from being diluted by the new legal tender, the Applicants then wrote to CABS giving them a written instruction that there would be no further deposits or withdrawals from the account unless advised to do so in writing. The aim appears to have been to preserve the USD bank balance.

The Applicants were later advised by CABS that their deposits had been compulsorily converted into the RTGS FCA by operation of law and therefore, the US$142 000.00 was payable in RTGS$142 000.00. The Applicants were not satisfied and they then approached the High Court for relief. In the High Court, the main relief the Applicants sought was a court order directing CABS to pay the Applicants US$142 000.00 cash. In the alternative, they sought three things:

  1. A court order directing RBZ and the Minister of Finance to pay the US$142 000.00 cash;
  2. A declaratory order that Exchange Control Directive No. RT 120/2018 was a nullity; and
  3. A declaratory order striking down section 44B (3) and (4) of the Reserve Bank Act [Chapter 22:15] as unconstitutional.

The High Court then granted both the main relief and the alternative relief. This was legally incompetent. If the High Court had found merit in the Applicant’s case, it ought to have only granted the main relief only or the alternative relief independently. It could not grant both at the same time.

CABS, RBZ and the Minister of Finance all appealed against the decision of the High Court to the Supreme Court. The Supreme Court allowed the appeal finding that the High Court had erred in determining a matter that was not before it. Particularly, the constitutionality of the Exchange Control Directive No. RT 120/2018 and section 44B (3) and (4) of the Reserve Bank Act [Chapter 22:15] when no argument had been presented or advanced before it.

Further, the Supreme Court found merit in CABS’ argument that it enjoyed a banker/customer relationship which was interfered by RBZ through the Exchange Control Directive No. RT 120/2018. As such, the main relief could not be granted since CABS’ could not be ordered to pay the Applicants when its regulator’s directive was still in force. The Supreme Court held that once this finding was made, it effectively dismissed the main relief (and only relief) against CABS.

In general, the Supreme Court had reservations about how the High Court did not adhere to a principle of subsidiarity. This principle provides that litigants who aver that a right protected by the Constitution has been infringed, must rely on legislation enacted to protect that right and may not rely on the underlying constitutional provision directly. This was set out in the Jessi Majome case. To put it simply, constitutional arguments are to be referred to as a last resort. Contrary to this principle, it appears the High Court was eager to hear and deliver judgment on constitutional issues when no such issues were rightly before it.

To this end, the Supreme Court found that the Applicants failed to make their case given the fact that a case stands or falls on its founding papers. The founding papers filed of record did not fully canvas material averments neither were they positively motivated. As a result, all 3 appeals were allowed with costs. What this means is that Exchange Control Directive No. RT 120/2018 is still part of our law. We are now effectively back to basics.

MawereSibanda Commercial Lawyers represented CABS in both matters in the High Court and in the Supreme Court.

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