Mayhem looms in banks

via Mayhem looms in banks – NewsDay Zimbabwe by Charles Laiton October 14, 2013

IN a landmark ruling likely to send shock waves in the banking sector, the Supreme Court on Friday ordered Standard Chartered bank to pay back a client’s funds which it surrendered to the Reserve Bank of Zimbabwe (RBZ) following central bank governor Gideon Gono’s directive six-years ago.

This could come as a relief to a lot of companies and could open floodgates from companies that lost millions of dollars when they woke up to find their bank accounts empty after the RBZ took a raid on them at the behest of Gono.

As a result of that directive scores of commercial banks had refused to pay their customers arguing it was the responsibility of the central bank as they simply carried out its directive.

This judgment, which came about after China Shougang International, took Standard Chartered bank to court seeking to recover thousands of dollars the latter had refused to pay arguing it had surrendered the funds to the central bank.

China Shougang International, is a foreign investor whose specific purpose is to refurbish blast furnaces at Ziscosteel in Redcliff. In October 2007, the firm held two accounts with Standard Chartered bank, Kwekwe branch, with an aggregate credit balance of $47 739,86.

The Supreme Court said when the Chinese firm deposited the funds into the bank account, the funds automatically became the bank’s funds and when the latter surrendered the funds to the RBZ, it did so at its own peril.

“The general rule relating to deposits made in a bank account by a customer is that the money becomes the property of the bank which can use such deposit as it pleases so long as it pays to the depositor, on demand, the equivalent of the amount deposited in the account,” Justice Vernanda Ziyambi said.

Standard Chartered bank had argued that having made payment to the RBZ in terms of its directive, it no longer had China Shougang International’s money in its possession and was consequently discharged from its obligation to make payment upon demand by the firm, an assertion dismissed by the court.

“But as has been demonstrated above, the dealings by the appellant (Standard Chartered) with the deposits in the accounts, namely, the payment to the RBZ, were made at its own risk and did not affect its obligation in law to pay its debt to the respondent (China Shougang international) on demand. The appeal is accordingly dismissed with costs,” Justice Ziyambi said in a nine-page judgment which was concurred by Justices Paddington Garwe and Ben Hlatshwayo.

Standard Chartered bank, through its lawyer, Advocate Adrian De Bourbon, filed an appeal at the Supreme Court after losing the case at the High Court early this year.

The Chinese firm was represented by Tendai Masawi of Masawi and Partners legal practitioners.