Zimbabwe: Landmark Ruling On U.S.$, RTGs

Chief Justice Luke Malaba.
22 January 2020

The Supreme Court yesterday ruled that all debts incurred before February 22 last year must be settled in the local currency at a 1:1 rate against the US dollar in line with Statutory Instrument (SI) 33 of 2019.

The SI abolished the multi-currency regime and reintroduced the Zimbabwe dollar.

Chief Justice Luke Malaba made the landmark ruling in an appeal case involving Zambezi Gas Zimbabwe (Pvt) Limited against mining services provider N.R. Barber (Pvt) Ltd and the Sherriff of Zimbabwe.

Zambezi Gas had appealed against a High Court judgment which instructed the gas company to pay a May 2018 debt using the interbank rate and not 1:1 rate which was effected in February 2019.

N.R. Barber's lawyers argued that in interpreting SI 33/19, the court should have regard to the principle of parity.

The firm enjoined the court to have regard to the fact that a judgment was a judicial fact that resulted from adjudication.

The contention was that in interpreting the statute, the court should place N. R. Barber in the position it would have been in had SI 33/19 not been enacted.

It was argued that the SI was a bridge between the US dollar and the RTGS dollar and in that regard, the court should have considered the interbank exchange rate as a means of arriving at parity.

But Chief Justice Malaba ruled that the payment of RTGS$4 136 806,54 made by Zambezi Gas was in full and final settlement of the debt in terms of Section 4(1) (d) of the S.I. 33/ 2019.

He found that the arguments by N.R. Barber were devoid of merit.

"Counsel (N.R Barber lawyer) would like the court to believe that a conversion of a foreign currency denomination to a local currency denomination amounts to a lesser value in the local currency," he said.

"This reasoning is wrong at law. There can be no parity to talk about once it is accepted that the RTGS dollar is a currency denomination with a set legal value.

"It is the legal tender used in Zimbabwe and as such carries a specific value. Once a conversion of the value of an asset or liability denominated in United States dollars is made to the value of RTGS dollars, the converted value remains the same, as the two different currency denominations both carry value."

Chief Justice Malaba noted that no exchange rate could be applied as the judgment debt remained a judgment debt with a value after it was converted to the local currency.

"The RTGS dollar has the value given under the one-to-one (1:1) rate and it remains on that value even after the effective date," he said.

"The first respondent (N. R. Barber) and likewise the court a quo was wrong at law in trying to find parity by adding value on the RTGS dollar through the interbank rate."

Section 4 (l)(d) of SI 33/19 stated that for such unique liabilities, including judgment debts, a rate of 1:1 between the US dollar and the RTGS dollar would apply.

The transactions entered into after the effective date, would fall under the provisions of section 4(1)(e) of SI 33/19, added the Chief Justice.

To this end, Chief Justice Malaba said the payment of RTGS$4 136 806,45 made by the appellant as settlement of the judgment debt was a full and final settlement of the judgment debt in terms of Section 4(1)(d) of SI 33/19.

The court heard that N.R. Barber offered services to Zambezi Gas in May 2018 charged at US$3 885 000.

Following the promulgation of S.I 33 of May 2019, Zambezi Gas paid RTGS$ 4 136 806,54 to N. R. Barber being debt plus interest.

N. R. Barber then approached the High Court to force Zambezi Gas to pay an additional US$3 992 018,31 arguing that RTGS$4 136 806,54 Zambezi Gas had paid was equivalent to US$144 778,23 as per the payment date's interbank rate in May.

Zambezi Gas was challenging a US$3 885 000 lawsuit, which the High Court had ordered the company to pay N.R Barber regarding a mining services the latter had provided at Entuba Coal Mining Concession in Hwange in 2014.

The ruling will see Zambezi Gas paying N.R Barber Z$3 885 00.

Mafongoya & Matapura law firm represented N.R Barber in the matter.

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