MBCA Bank Ltd v RBZ & Another (HC 1147/14) [2015] ZWHHC 482 (26 May 2015);

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Headnote and flynote

Search Summary:

Practice and procedure – parties – joinder – party having potential claim against it by one of parties to litigation – avoidance of multiple suits – joinder ordered

Headnote and Holding:

The applicant was a commercial bank which was being sued by the second respondent (“Portland”), one of its depositors, for certain sums of foreign currency which were the balances standing to its credit in the current accounts it held with the applicant. The balances were affected by a directive issued by the first respondent, the Reserve Bank (“RBZ”), in October 2007 in terms of which it centralised all foreign currency accounts by directing that they be lodged with it. The applicant complied with the directive and lodged the second respondent’s bank balances with the RBZ. This directive was later held by the Supreme Court to be ultra vires.

The second respondent did not cite the RBZ as a party. The applicant filed a plea in which it admitted the deposits but averred that upon the issue of the directive, it had notified Portland that the money was being transferred to RBZ in terms of the directive. It further averred that Portland “consented to the new arrangement”, alternatively there was quasi-mutual assent to it. The parties therefore novated the agreement by delegation. The applicant averred that thereafter Portland directly transacted with RBZ on its account held by RBZ. It successfully made some withdrawals and as such was aware from 2007 that it was RBZ, not the applicant, which held Portland’s money.

The applicant sought to have the RBZ joined as a party. It argued that Portland was aware of the transfer and acquiesced; and that it was entitled to an indemnity from the RBZ.

The RBZ opposed the application on the basis that the directive did not create a relationship, legal or otherwise, between itself and Portland. It did not, at any stage, take charge or transfer of Portland’s account and did not transact with Portland. It had no interest in the legal dispute between the applicant and Portland. Portland opposed the application on the basis that its claim was only against the applicant and no relief was sought against the RBZ.

Held: a defendant in an action has a right to seek the joinder of a co-defendant at any stage of the proceedings. In terms of r 85 of the High Court Rules 1971, two or more persons may be joined in one action as plaintiffs or defendants where, if separate actions were brought against each of them, some common question of law or fact would arise in those actions and also rights to relief claimed arise out of the same transaction. Joinder of a party to proceedings is something within the discretion of the court, which discretion of course should be exercised judiciously.

A joinder can be sought at any stage of the proceedings. The proceedings are commenced when a summons is issued and completed upon delivery of a judgement. This application had been made during the proceedings and the court was at liberty to order a joinder.

The applicant did not convert Portland’s money to its own use. It transferred it to RBZ in compliance with a directive which was ultra vires the enabling regulations. The end-user of Portland’s funds was the RBZ, which was now distancing itself from liability on the basis that it had no relationship with Portland. This might be so, but the applicant was entitled to demand some form of indemnity from RBZ, if for no other reason than it was the RBZ which induced it to breach its contract with Portland and also that RBZ wrongfully interfered with contractual rights.

The consequences of the non-joinder of RBZ would be that the applicant would have to pay Portland, money which in all fairness RBZ should pay as it appropriated it. While the RBZ would like to stay as far away as possible from the suit, it was the source of the problem and should participate in the determination of the matter. If it were not joined, the applicant would have to litigate against it in a separate action. The joinder of RBZ would bring all matters in dispute in the cause under one umbrella and they will be effectually and completely determined in the spirit of r 87(2)(b).

Full judgment

HH 482-15

HC 1147/14

MBCA BANK LIMITED

versus

THE RESERVE BANK OF ZIMBABWE

and

PORTLAND HOLDINGS LIMITED

HIGH COURT OF ZIMBABWE

MATHONSI J

HARARE, 19 & 27 May 2015

Opposed application

I Chagonda, for the applicant

V Mkwachari, for the 1^st respondent

P C Paul, for the 2^nd respondent

MATHONSI J: The applicant is a registered commercial bank which has been sued by one of its depositors, Portland Holdings Limited, in HC 160/14 for payment of the sums of USD 62 223,94 and ZAR 6 764 987.94 being balances standing to its credit in current accounts held with the applicant.

As is now common cause, the balances were affected by a directive issued by the first respondent (RBZ) whose function it is to regulate and supervise banking institutions, in October 2007 in terms of which it centralised all foreign currency accounts by directing that they be lodged with it. The applicant complied with the directive and lodged the second respondent’s bank balances with the former.

In HC 160/14, the second respondent (Portland) did not cite RBZ as a party to the proceedings. It averred that it had deposited its money into foreign currency accounts held with the applicant. On 25 October 2013, it demanded the payment of the money from the applicant which has failed and/ or refused to repay the amounts of USD 62 223.94 and R 6 764 987.94 Portland then prayed for judgement in the two sums together with prescribed interest and costs of suit.

After causing appearance to be entered the applicant filed a plea in which it admitted the deposits but averred that upon the issue of the RBZ directive, it had notified Portland that the money was being transferred to RBZ in terms of the directive. It further averred that Portland “consented to the new arrangement” or alternatively there was quasi-mutual assent to it. The parties therefore novated the agreement by delegation.

The applicant pleaded that the existence of the new arrangement was demonstrated by the fact that thereafter Portland directly transacted with RBZ on its account held by RBZ. It successfully made some withdrawals and as such was aware from 2007 that it was RBZ and not the applicant that held Portland’s money.

The applicant has launched this application seeking to join RBZ as a party to the proceedings and asserts in the founding affidavit of Neeta Joshi, the head of Legal, Governance and Compliance, that when it complied with the RBZ directive it notified its clients including Portland, which was, at all material times, aware of the transfer of its foreign currency balances to RBZ. Indeed, for quite sometime after that transfer, Portland was transacting on its account which had been transferred to RBZ by making withdrawals successfully dealing directly with RBZ. In fact in one letter Portland addressed to RBZ on 20 February 2008 requesting the release of its foreign currency it had concluded:

“Portland Holdings Limited appreciates the support given by the Reserve Bank of Zimbabwe to Portland Holdings Ltd in the past, and we earnestly hope that the present delay in the RBZ allowing for the payment of our foreign creditors will be resolved IMMEDIATELY so that the company can settle these accounts and maintain operations.”

In yet another letter written by Portland to the applicant on 1 August 2013, it had stated:

“We request that you forward this application to the Reserve Bank of Zimbabwe (RBZ) for their approval and for the release of our funds held by the RBZ.”

The applicant insists that unlike in the case of Standard Chartered Bank Zimbabwe Limited v China Shougang International SC 49/13 (as yet unreported) in which the Supreme Court held that the actions of RBZ in issuing the directive referred to above did not absolve the bank from its contractual obligations to its depositor to pay the bank balance on demand, in the present case Portland was not only aware of the transfer of its money to RBZ, it also participated by demanding and making direct withdrawals from RBZ. This therefore distinguishes this case from that of Standard Chartered Bank, supra, which had raised the defence that it had been discharged from its contractual obligations to its depositor by a supervening impossibility, the RBZ directive

Mr Chagonda, who appeared for the applicant took the argument further, by submitting that the applicant is entitled to demand an indemnity from RBZ and intends to amend its plea to include that averment in the event that the order for joinder is granted.

RBZ has opposed the application for joinder on the basis that it issued the directive in good faith and without negligence which directive did not create a relationship, legal or otherwise, between itself and Portland. It did not, at any stage, take charge or transfer of Portland’s account and did not transact with Portland. It has no interest in the legal dispute between the applicant and Portland. As there is no legal foundation for its joinder, the application should fail.

Portland surprisingly also opposed the application, maintaining that its claim is only against the applicant on the basis of the authority of Standard Chartered Bank Limited, supra. RBZ does not have any interest in the claim being made against the applicant and no relief is sought by it against RBZ. As such joining RBZ as a party would be meaningless.

Although RBZ had raised a number of defences including the issue of prescription, failure to give notice of the suit in terms of s 63B of the Reserve Bank Act [Chapter 22:15] as read with s 6(1) of the State Liabilities Act [Chapter 22:13] and its immunity to suit for anything done in good faith and without negligence, Mr Mkwachari who appeared for RBZ appeared to abandon those arguments at the hearing, content to anchor his opposition on the basis that there is no claim being made against RBZ by Portland and the applicant in the main action. For that reason, joinder should be refused. He relied on the authority of Pitsiladi & Ors vs ABSA Bank & Ors 2007 (4) SA 478 and Bawden v Ndebele & Anor HB 110/11 (unreported).

In Pitsiladi & Ors the court reasoned at 482H that:

“It must be accepted that where the applicant’s case against the third party is undoubtedly without any merit, the granting of leave to join the third party would be pointless and be prejudicial to the plaintiff, whose claims would be unnecessarily delayed and to the prejudice of the third party, who would unnecessarily become a party to the proceedings and incur costs.”

I do not think that the applicant’s case is without any merit. For a start, a defendant in an action has a right to seek the joinder of a co-defendant at any stage of the proceedings. In terms of r 85 of the High Court of Zimbabwe Rules, 1971, two or more persons may be joined in one action as plaintiff’s or defendants where if separate actions were brought against each of them some common question of law or fact would arise in those actions and also rights to relief claimed arise out of the same transaction.

In terms of r 87(2):

“At any stage of the proceedings in any cause or matter the court may on such terms as it thinks just and either on its own motion or on application-

……..
order any person who ought to have been joined as a party or whose presence before the court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, to be added as a party.

but no person shall be added as a plaintiff without his consent signified in writing or in such other manner as may be authorised.”

So joinder of a party to proceedings is something within the discretion of the court, which discretion of course should be exercised judiciously. The first respondent has submitted that the court can only make an order of joinder under r 87 after hearing evidence or in the course of a trial. It is not clear from where the first respondent derives such assertion. A joinder can be sought at any stage of the proceedings. The proceedings are commenced when a summons is issued and completed upon delivery of a judgement. This application has been made during the proceedings and the court is at liberty to order a joinder.

What appears to be common cause is that the applicant did not convert Portland’s money to its own use. It transferred it to RBZ in compliance with a directive which the Supreme Court has now ruled, in Standard Chartered Bank, supra, as having been ultra vires the enabling regulations. The end-user of Portlands funds is there, it is RBZ which is now distancing itself from liability on the basis that it had no relationship with Portland. This may be so, but surely the applicant is entitled to demand some form of indemnity from RBZ, if for nothing but that it is RBZ which induced it to breach its contract with Portland and also that RBZ wrongfully interfered with contractual rights:Trojan Nickel Mine Limited v Reserve Bank of Zimbabwe HH 169/13.

I am aware that the judgement in Trojan Nickel Mine Limited is still the subject of an appeal wherein the Supreme Court has reserved judgement. It has not been overturned. I therefore do not have any reason to shift my position from the findings made in that case where I infact distinguished that case from Standard Chartered Bank, supra on the basis, inter alia that RBZ had not been cited. In casu, the applicant would like RBZ to be cited and in my view, RBZ has to explain itself on a number of respects including why it should not indemnify the applicant against the suit brought by Portland.

The consequences of the non-joinder of RBZ are pretty obvious. The applicant will have to pay Portland, money which in all fairness RBZ should pay as it appropriated it. In Marais & Anor v Pongola Sugar Milling Co & Ors 1961 (2) SA 698 (N) the court adopted a two-tier approach in the determination of a joinder application namely;

that a party must have a direct and substantial interest in the issues raised in the proceedings.
that his rights may be affected by the judgement of the court.

Understandably RBZ would like to stay as a far away from the suit as possible but surely but it is the source of the problem and in my view should participate in the determination of the matter. I associate myself fully with the remarks of Cheda J in Sibanda v Sibanda & Anor 2009 (1) ZLR 64 (H) 66H; 67 A where he said:

“It is therefore, pertinent to enquire as to the consequences of a non-joinder. The prejudice is there for anyone to see: there will be a lot of inconvenience, not only to the applicant, but to the court as well. No doubt this will result in the applicant being oppressed and, in an attempt to extricate herself there from, there will be a multiplicity of actions, a situation which should be avoided if possible. See Morgan & Anor v Salisbury Municipality 1933 AD 167.”

In the present case if the RBZ is not joined as a party the applicant may be made to pay Portland by virtue of the pronouncement of the Supreme Court in Standard Chartered Bank, supra; That will however certainly not be the end of the matter. The applicant will no doubt litigate against RBZ to recover the loss. This court will then sit separately to determine that other suit and whether the applicant should indemnified. There will be an inconvenience on both the applicant and the court. On the other hand the joinder of RBZ will bring all matters in dispute in the cause under one umbrella and they will be effectually and completely determined in the spirit of r 87(2) (b). I am therefore inclined to join the RBZ.

The argument raised by RBZ relating to notice cannot possibly be made in an application for joinder. This is because the application for joinder is not a claim for money. Even if it was, one would condone the failure to give adequate notice especially as RBZ was fore warned of the impending litigation: Barclays Bank of Zimbabwe Limited v Reserve Bank of Zimbabwe & Anor HH 477/13.

The question of prescription and indeed immunity are issues RBZ can raise in its plea once it has been joined. It is not apparent that they may defeat the applicant’s case as to lead one to conclude that it is undoubtedly without any merit: Pitsiladi & Ors, supra.

In the result, it is ordered, that

The 1^st respondent be and is hereby joined as the 2^nd defendant in case number HC 160/14
Leave be and is hereby granted to the 2^nd respondent’s legal practitioners to serve all court processes including summons commencing action issued under case number HC 160/14 on the 1^st respondent.
The costs of this application shall be costs in the main cause.

Atherstone & Cook, applicant’s legal practitioners

T H Chitapa & Associates, 1^st respondent’s legal practitioners

Wintertons, 2^nd respondent’s legal practitioners

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MBCA Bank Ltd v RBZ & Another (HC 1147/14) [2015] ZWHHC 482 (26 May 2015);

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