AN Israel-registered company has lost a High Court application in which it wanted to recover its US$1,9 million after it was converted into the now demonetised local currency.
Magic Software Enterprises Limited cited Nedbank Zimbabwe in its application for an interdict against the bank.
The company was seeking an order declaring the conversion of its funds to RTGS dollars as unlawful.
According to court papers, in 2016, Magic Software was contracted to provide an upgrade to local telecommunications entity TelOne’s Leap Billing Services.
In 2017, Magic Software approached Nedbank seeking to open an account through which TelOne would settle the payment for services rendered.
Magic Software alleged that Nedbank’s officials specifically advised and confirmed that they would avail a “non-resident escrow account”.
The account was subsequently opened.
However, Nedbank allegedly claimed that the account was irregularly opened in terms of Reserve Bank of Zimbabwe (RBZ)’s exchange control regulations.
- Fresh land invasions hit Whitecliff
- Pomona cash row escalates
- Border Timbers targets European markets
- SA name strong A side for Zim tour
Keep Reading
Nedbank allegedly said it was Magic Software’s responsibility to secure such authorisation according to the RBZ regulations.
Magic Software refuted the claim and, instead, alleged that Nedbank failed to render correct advice.
After the account was opened, TelOne deposited US$1 996 723,02 for services rendered.
The deposits were made on the real time gross settlement (RTGS) payment platform.
Magic Software’s account, constituting on-shore deposits from TelOne, was designated an RTGS FCA account after the RBZ monetary policy changes.
The net effect was that the funds were denominated as a local currency and Magic Software was unable to repatriate the money when it attempted to do so in June 2019.
Its account balances became what was known as “blocked funds”.
Several attempts to secure the release and repatriation of the blocked funds, including a formal application to the RBZ failed.
RBZ rejected Magic Software’s pleas for exemption.
Nedbank argued that the failure by Magic Software to join the RBZ to the proceedings made the application defective.
High Court judge Justice Joseph Chilimbe said it was not disputed that Magic Software was a foreign entity.
“The effect of TelOne’s emphatic submissions to the RBZ further serve to confirm that the proceeds into the escrow account undoubtedly constituted transit funds earmarked for eventual repatriation,” Justice Chilimbe said.
“In that regard, it cannot again be doubted that such understanding created a deeming that the primary obligation between Magic Software and TelOne was denominated in United States dollars.”
Justice Chilimbe, however, said no case had been properly established to warrant the discretionary intervention of the court in favour of Magic Software.
“The relief sought is unreachable, and will thus be refused with costs. It is, therefore, ordered that the application be and is hereby dismissed with costs.”
