Banks’ lawsuits choke High Court

via Banks’ lawsuits choke High Court – DailyNews Live 9 February 2015

HARARE – Zimbabwe’s judicial system is currently overwhelmed by banking sector lawsuits pitting financial institutions and clients who may easily settle matters amicably before approaching the courts, Master of High Court Eldard Mutasa has said.

Mutasa told a recent meeting between defunct Royal Bank Limited Zimbabwe (Royal Bank) and its creditors that most cases similar to theirs could be solved cordially without congesting the courts.

“The (justice) system also has other matters to deal with, these cases are flooding the system.”

He added:“When I see creditors and banks agree on something at court I am very happy, but I ask why this did not happen before matters got to court? It is my dream and hope that all parties come to an amicable agreement on matters before engaging the system.”

Mutasa noted that most of the cases brought to the High Court were sensitive but could be solved without third party intervention.

Most of the cases going before the courts are commercial lawsuits, particularly defaults on loans and credit arrangements as the country battles with a liquidity crunch.

According sources at the High Court, banks have been filing an increasing number of lawsuits against their clients to recover overdue loans.

“Judgments against defaulting clients and sales in execution by the Master of the High Court have also increased recently. The whole system is bursting at the seams with banks enforcing debt collection,” said the source.

Other cases are on liquidating fixed property, which would have been pledged as collateral, by defaulting clients.

At the creditor’s meeting, Royal Bank said it would start paying creditors who are owed a total of approximately $12 million in March this year.

Royal Bank’s creditors last week also launched a legal challenge against liquidator Cecil Madondo for failing to “take care of their interests” by selling the institution’s assets for a song.

This comes as troubled AfrAsia Zimbabwe Holdings Limited (AZHL)’s banking and microfinance subsidiaries are also contesting $16,4 million lawsuits instituted by various clients.

Among the aggrieved is Alphavic Management Consultancy (Private) Limited which is suing the group’s flagship unit AfrAsia Bank Zimbabwe Limited (ABZL) for $15,3 million in damages for alleged financial prejudice suffered when it failed to access funding under a PTA Bank line of credit.

“Client alleges that it negotiated for a $10 million line of credit with PTA and that the bank failed to avail funding to it. The bank is opposing the claim,” said AZHL in its financials for the year to June 2014.

Summons have also been issued against ABZL and its two former employees by the Local Authority Pension Fund for the sum of $926 392 alleged to have been fraudulently withdrawn from their account.

The group’s micro-finance unit, MicroKing Finance Private Limited (MicroKing) is also being sued by Cris Davis Marketing Limited for damages amounting to $200 000 for alleged lost business emanating from a title deed belonging to the client that got lost while in MicroKing’s custody.

The latest claims come after businessman Zach Wazara’s collapsed Spiritage last year instituted legal proceedings against ABZL claiming $78 million for damages for alleged loss in value of its subsidiary Valley Technologies.