Nedbank Zimbabwe wins US$2m Supreme Court case

The Supreme Court has thrown out an appeal by Israel-based firm Magic Software Enterprises Limited, which had sought to overturn a High Court decision that ruled nearly US$2 million held in a Nedbank Zimbabwe account was not a foreign loan.

In a ruling delivered by Justice Tendai Uchena and concurred by Justices Samuel Kudya and Felistus Chatukuta, the apex court upheld the High Court's judgment, concluding that Magic Software had failed to provide adequate evidence to support its claims.

At the centre of the legal dispute was Magic Software's assertion that US$1 996 723.02 deposited in a non-resident escrow account at Nedbank constituted a foreign loan. The company argued that the amount should have been excluded from conversion into local RTGS currency under the Reserve Bank of Zimbabwe's Exchange Control Directive RT120/18, which re-designated foreign currency accounts in 2019.

However, Nedbank Zimbabwe disputed the claim, maintaining that the funds were not part of a foreign loan and had been rightfully converted into RTGS dollars in compliance with the RBZ directive.

Magic Software's legal argument, led by lawyer Thembinkosi Magwaliba, was that the bank had unlawfully converted the funds and had a duty to preserve the amount in its original foreign currency denomination. He further alleged that the bank should have guided the company on acquiring the necessary exchange control approvals.

The case was linked to a Leap Billing Upgrade Agreement between Magic Software and a local telecommunications firm, during which Magic Software had reportedly faced difficulties in receiving payments due to foreign currency shortages in Zimbabwe. The company then deposited the funds into the escrow account locally.

Justice Uchena, delivering the verdict, noted that the appellant had not submitted the contract governing the escrow account or sufficient documentary proof to substantiate that the funds were indeed foreign currency obligations.

"In view of the finding that the appellant's failure to place the contract before the court a quo and its failure to prove the allegations it had said were contained in Annexures B and C, there is no need to determine the issue on whether or not the respondent correctly acted in terms of the contract when it, in terms of RT 120/18, re-designated the appellant's account to an RTGS foreign currency account," Justice Uchena stated.

Representing Nedbank, advocate Thabani Mpofu argued that the claim had been prescribed and that the funds in question were not sourced from offshore but from local RTGS transfers, and thus did not qualify for protection from the currency conversion directive.

The judgment brings an end to a years-long legal contest and reaffirms the legality of the RBZ's controversial currency reclassification measures that affected thousands of account holders when implemented in 2019.