RIOZIM Limited has decided not to honour an ostensible $4,5 million debt owed to AfrAsia Bank, which is presently in liquidation, after it emerged the financial institution could have unfairly bloated interest and bank charges on the debt.
The miner recently engaged the Interest Research Bureau (IRB) - an independent and privately-owned firm that helps companies to re-compute borrowed loans - to audit the debt due to AfrAsia Bank (formerly Kingdom Bank).
High Court judge Justice Lavender Makoni recently nullified the deed of settlement entered between the bank and the gold miner. Justice Makoni ruled that RioZim was not aware at the time the company concluded the deed that it had been overcharged on interest.
"It was later on when new directors came on board that a query was raised regarding the amounts that had been paid and those that were outstanding," said Justice Makoni.
"That is when a decision was made to engage IRB. I will, therefore, make a finding that at the time when the respondent concluded the compromise it was not aware of the fact that it had been overcharged on interest and bank charges."
Afrasia Bank was ordered to pay the cost of suit. The matter only spilled into the courts after AfrAsia sought to enforce payment of the contract.
The court heard that in 2012 after RioZim refused to honour its obligation citing unjust enrichment on the part of Afrasia, the latter subsequently instituted a $8,6 million (plus interest) claim against the resources firm, which was strenuously resisted.
The two parties then agreed to enter into a deed of settlement in August 2013 through which RioZim agreed to pay $4,6 million through instalments.
After appointment of a new board of directors, the gold mining giant then engaged IRB in a quest to independently verify the amount. The IRB report showed that Afrasia had overcharged the mining firm on both interest and bank charges.
RioZim then stopped making payments to the bank against the terms of the deed. Through its lawyer, Advocate Thabani Mpofu, instructed by Winterons, RioZim defended the claim on the basis that the deed was a product of serious mistake and thus would lead to unjust enrichment of the Afrasia Bank.
The bank's lawyer, Mr Farai Siyakurima, of Sawyer and Mkushi law firm submitted that the deed was a compromise, which contained a variation clause, but RioZim wanted to vary the deed without the banks consent.
He submitted that mining giant was bound by terms of the deed and no error was made on both parties as RioZim was at the time represented by a competent financial manager and counsel with "fine brains".