AL Shams Global BVI Ltd, a company owned by businessman Jayesh Shah, has filed an appeal at the Supreme Court seeking to reverse a High Court judgment which dismissed a US$19,5 million damages claim from the Reserve Bank of Zimbabwe (RBZ) for gross negligence and breach of statutory duty.
The company is registered in the British Virgin Island, and operates in Zimbabwe as a foreign company.
It had sued the RBZ concerning its liability, following the failure of Interfin Bank under its supervision.
Al Sham Global claimed that RBZ, being aware that Interfin was operating with a capital deficit of more than US$38 million and having failed to satisfy the central bank’s conditions for a licence, did not ensure that it was adequately capitalised and fit to operate.
The company accused the RBZ of failing to take steps to address the situation after submitting that the central bank failed to adequately supervise a weak bank.
It alleged that RBZ also failed to take corrective action in breach of its statutory obligations, hence it breached the provisions of section 48 of the Banking Act which obliged it to act.
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Shah was the sole witness in the matter and narrated how some bankers’ acceptances it purchased from Interfin on a buy back basis were not honoured.
He said the company only discovered when it instituted proceedings against the liquidator of Interfin that it had been operating with a capital deficit.
Shah also argued that the apex bank ought to have foreseen and by implication, did foresee that its breach of statutory duty would culminate in direct loss to his company.
However, High Court judge Justice Mary Zimba-Dube dismissed the company’s application, ruling that in its declaration, Al Shams Global, made no direct allegation of bad faith.
The court also ruled that Al Shams Global was required to plead bad faith coupled with allegations of negligence because the requirement for good faith is inextricably linked to negligence.
Shah then noted an appeal at the Supreme Court arguing that the lower court erred in dismissing the company’s claim.
“The court a quo (lower court) erred in dealing with the question of the respondent’s immunity which was neither pleaded nor an issue for trial as per the agreed pre-trial conference minute.
“The court a quo erred in holding that the supervisory powers reposed in the respondent (RBZ) in terms of the Banking Act [Chapter 24:20] are discretionary and do not actuate any actionable duty of care,” the notice of appeal read.
He also argued that the High Court was wrong in concluding that the negligence envisaged in terms of section 63A of the Banking Act relates only to the positive actions of RBZ and does not extend to such respondent’s omissions.
“Such erroneous interpretation actuates an absurdity and renders nugatory the whole regulatory framework of the banking sector,” said the company.
The company insisted that RBZ’s actions made it suffer a huge loss, saying that the High Court ought to have turned its mind to the fact that if it had properly supervised Interfin Bank Limited as stipulated by statute, then it (company) would not have suffered pecuniary loss.
Al Shams Global said it was entitled to damages before praying for the ruling of the High Court to be set aside.
It prayed that its claim succeeds, and that RBZ be ordered to pay US$19,5 million resulting from its failure to ensure that Interfin Bank Limited was adequately capitalised as required by the Reserve Bank of Zimbabwe Act.
The matter is pending at the Supreme Court.