Stanbic Bank Zimbabwe has been awarded $6 million after successfully suing a construction company for failure to honour an overdraft facility arrangement.
The bank entered into a financial deal with CEEZED Construction (Private) Limited in which it lent $2 100 000 to the latter under a short-term overdraft facility agreement that was sealed in August 2012.
When the construction firm failed to service its debt, the bank approached two companies-- Costain Africa (Private) Limited and Southview Investments (Private) Limited that acted as sureties and co-principal debtors - to play their part in servicing the debt.
The two firms denied liability, prompting the bank to approach the High Court to recover its dues, which had increased to $3 070 207 plus interest at the rate of 20 percent annually for five years.
After a fully contested civil trial, Justice Jester Charewa ruled in favour of the bank.
In her 18-page judgment, Justice Charewa established that the bank had proved its case against the three defendants on a balance of probabilities and ordered Costain Zimbabwe and Southview to make payment to the bank as claimed.
"Accordingly, it is ordered that the second and third defendants shall pay the plaintiff the sum of $3 070 207 and interest thereon at the rate of 20 percent per annum above the bank's base rate calculated from May 2, 2012 to the date of payment in full," said Justice Charewa.
According to calculations of the interest prescribed over the period of five years from May 2012 to May 2017, CEEZED, Costain and Southview will now be required to fork out slightly over $6 million to pay the bank.
The dispute started when in August 2010, CEEZED obtained an overdraft facility from Stanbic amounting to $2 100 000.
Security for the facility was provided by way of unlimited guarantee executed by Costain Construction and Southview in 2006.
The facility was subsequently rolled over to March 2, 2011 and revised up to a maximum of $2 500 000. The facility was reduced to writing four weeks later, and was drawn in full.
The facility was covered by deeds of surety executed on March 28 the same year.
Interest at 20 percent per annum and related charges were raised against the facility, leading to the total amount claimed in the summons as at July 2012.
The bank, which was represented by Advocate Thabani Mpofu instructed by Mr Regis Chawatama of Mawere, Sibanda Commercial Lawyers, argued that the deeds of surety were valid and legally binding against Costain and Southview, since they were signed by persons with requisite executive powers on the strength of board resolution signed by persons with the necessary authority to sign such board resolutions.
In their counter argument, Costain and Southview, through their lawyer Adv Thembinkosi Magwaliba, said they were not liable to pay the money.
They argued that the persons who had signed the deeds of surety had no authority to bind them in circumstances where Stanbic knew or ought to have known that the mandate presented by those persons were defective.
But in her ruling, Justice Charewa said it is settled law that co-principal debtors remained jointly and severally liable for the payment of debt as long as the debt had not been extinguished.