Opposed
Application
MAFUSIRE
J:
[A] ABSTRACT
[1] The
applicants are importunate. They want back their money – $142,000 –
all in the currency of the United States dollars [USD]. If the first
respondent, their banker, will not pay, then the second and third
respondents, collectively the monetary authorities, should. The
applicants allege these monetary authorities are partly the reason
the first respondent will not pay. The applicants want a whole range
of some financial legislation, and certain monetary policies or
directives, set aside on the grounds of constitutional invalidity.
They first came to this court in 2019. The subject matter was the
same. This court ruled in their favour. It directed the first
respondent to pay.
The first respondent did not pay. All the respondents appealed
separately. The appeals succeeded. The judgment of this court was
vacated.
That was in March 2021. In August 2021 the applicants were back in
this court. It is still the same subject matter. But the thrust is
now different. They seek the following orders:
(i)
that
Exchange Control Directive No. R120/2018 issued by the Reserve Bank
[is] unconstitutional and invalid as it violates section 71 of the
Constitution;
(ii)
that
the Exchange Control Directive No. RT120/2018 is grossly unreasonable
and ultra
vires
section 35(1) of the Exchange Control Regulations, SI 109 of 1996,
and is invalid;
(iii)
that
section 44B(3) and (4) of the Reserve Bank Act are unconstitutional
and invalid as they violate section 71 of the Constitution;
(iv)
that
section 22(1)(b) and (d), section 22(4)(a) and section 23(1) and (2)
of the Finance (No. 2) Act of 2019 are unconstitutional and invalid
as they violate section 71 of the Constitution;
(v)
that
the conversion of the applicants USD142,000 to RTGS142,000 is
unconstitutional and invalid as it violates section 71 of the
Constitution;
(vi)
that
the first respondent should pay to the applicants the amount of
USD142,000;
(vii)
that
the first respondent is to pay interest on the aforestated amount at
the rate of 5% per annum from 28 November 2016, to the date of
payment; and
(viii)
that
the respondents must pay costs of suit, jointly and severally, the
one paying the other[s] to be absolved.
[B] BACKGROUND
[2] The
first respondent is a building society. It is a bank or an authorised
dealer for the purposes of exchange control regulations. At all
relevant times the applicants were in business as architects. They
banked with the first respondent. As at 28 November 2016 the balance
in their account was $142,000-00. The designation of the account was
USD. That designation was in line with the currency regime in force
at the time. At the time, the national economy was on a
multi-currency system. That had been the situation since 2009. In
terms of that system, the currencies of other countries, specifically
the British pound, the euro, the USD, the South African rand and the
Botswana pula had been made legal tender in Zimbabwe, courtesy of an
amendment to the Reserve Bank Act [Chapter
22:15].
The local currency would float and find its own level in the basket
of all these other currencies. Over the years, the local currency
depreciated in value so much that it practically became non-existent.
In 2015 the State President officially demonetized it through
statutory instrument [SI] 70 of 2015.
[3] After
the demonetization as aforesaid, there followed some rapid
developments in the monetary system. These were achieved through
policy pronouncements and legislative changes by the State President
in terms of the Presidential Powers (Temporary Measures) Act [Chapter
10:20],
or via the second respondent, as the central bank, and the third
respondent, as the Minister in charge of finance. Among other such
changes, the third respondent, was empowered in 2016, through a
statutory instrument, to reintroduce some form of local currency.
Such currency would comprise what would become known as 'bond
notes' and 'bond coins'. It would become legal tender. It would
be exchangeable at par value with any specified currency. Each unit
of a bond note would be exchangeable for one USD. The bond notes and
coins eventually came into operation in March 2017. This was achieved
through an amendment to the Reserve Bank Act.
The amendment practically reproduced SI 133 of 2016. But there were
two significant additions:
(i)
the amendment was deemed to have come into operation on 31 October
2016,
the date of SI 133 of 2016; and
(ii)
the bond note would be backed by a guarantee extended to the Reserve
Bank by one or more international financial institutions.
In
a press statement on 4 May 2016, the second respondent had disclosed
the extent of that financial guarantee. It was in the sum of USD$200
million. It had been issued by the African Export-Import Bank
[Afreximbank].
[4] The
next significant development was on 4 October 2018. On that date, the
second respondent issued the Exchange Control Directive RT120/2018.
The second respondent is empowered to issue such directives by
section 35(1) of the Exchange Control Regulations, 1996.
The background to the Exchange Control Directive RT120/2018 is this.
At that time the economy was still operating in the multi-currency
system. Bank accounts were all Nostro foreign accounts. “Nostro”
is an accounting term used by banks and monetary authorities. A bank
in Zimbabwe will operate a Nostro account with a foreign or
correspondent bank in the world financial centres where a float of
money designated in foreign currency is maintained. The Nostro
account is for settling foreign obligations of the local bank. The
local bank account transactions are replicated or “mirrored” in
the Nostro account of the correspondent bank. Of the basket of
currencies in use, the USD was the most predominate. Thus, most
Nostro foreign currency accounts were predominantly in USD. The
intrinsic provision of the Exchange Control Directive RT120/2018
directed banks to separate foreign currency accounts into two
categories, namely Nostro foreign currency accounts [Nostro FCAs] and
Real Time Gross Settlement [RTGS] foreign accounts [RTGS FCAs]. For
the present narrative, RTGS would be the new form of the local
currency. It would eventually be brought into circulation by central
Government via SI 33 of 2019. Its effective date was 22 February
2019.
[5] Exchange
Control Directive RT120/2018 was directed at authorised dealers,
principally banks. It addressed a number of issues. It said its
purpose was to “operationalise”
the measures which had been incepted earlier on to strengthen the
multi-currency system to enhance business viability and price
stabilization; to increase export generation capacity and to improve
market confidence. It explained further that the measures were aimed
at encouraging diaspora remittances, the banking of foreign currency
into the Nostro FCAs and to eliminate the co-mingling effect or
dilution of Nostro FCAs by RTGS balances. It was further stated that
the relationship between the two categorise of the foreign currency
accounts would continue to be at parity in order to preserve value
for money for the banking public and the investors during the
transition to a more market based foreign currency allocation system.
The market based foreign currency allocation system would be
implemented once the economic fundamentals had become appropriate.
[6] Before
this court, the third respondent has provided some further insights
into the thought process behind the implementation of the measures
above, particularly the split of people's bank balances into Nostro
FCAs and RTGS FCAs. In summary, and as I have understood him, the
multi-currency regime had come with its own problems. Market
distortions, liquidity crunches, cash shortages, and so on, dogged
the economy. Public confidence became difficult to maintain. Pressed
by international financial institutions such as the Bretton Woods, it
became imperative to initiate currency reforms. Key amongst such
reforms would be the adoption of a domestic currency. As at 1 October
2018 the currencies in use in the economy were both the USD and
another which had been created by the State through borrowing from
the second respondent, and the issuance of treasury bills. The latter
currency was at first nameless even though it continued to pass off
as USD. It was not a physical currency. It was a currency that could
only be transacted through the RTGS system. It was not a genuine USD
currency.
[7] The
third respondent further explains that the purpose of borrowing by
Government from the central bank and the issuance of treasury bills
had been to cover the domestic debt of State-owned entities. So, to
achieve the intended reforms, particularly the currency reforms, it
became necessary to separate the two types of currencies in use. In
pursuance of that policy, and through the second respondent's
monetary statement of 1 October 2018, financial institutions had been
directed to separate their customers bank accounts into two
categories: those holding actual dollars of the United States, and
those holding this other nameless currency still passing off as USD.
Banks would open Nostro FCAs into which genuine dollars of the United
States would be deposited. That other non-United States dollar
currency would remain as the existing customers accounts. Such
process of separation would take about ten days. The modalities would
be left to the financial institutions themselves. They would use
their own data bases such as the Know Your Customer [KYC] principles
to determine the source of the deposits in their individual customers
accounts. Henceforth, deposits or remittances from sources outside
the country would be channelled into the Nostro FCAs which would
automatically be created by the banks at no cost to their customers.
All other deposits would continue to be channelled into the existing
accounts.
[8] The
separation of the FCAs in terms of the Exchange Control Directive
RT120/2018 entailed that foreign currency realised from offshore or
foreign currency cash deposits would be credited into individual or
corporate Nostro FCAs. The sources specifically listed in these
regards included export proceeds, offshore loan proceeds, offshore
funds from foreign investors, diaspora remittances, and so on. On the
other hand, all RTGS or mobile transfers and deposits in bond notes
or coins would be credited into individual or corporate RTGS FCAs.
The third respondent eventually gave the nameless currency a name.
This was through SI 33 of 2019 aforesaid. That currency would be
called the RTGS dollar. SI 33 of 2019 empowered the second respondent
to issue the RTGS dollar as an electronic currency. It would be legal
tender in Zimbabwe. The RTGS balances, expressed in USD immediately
before the effective date, would be, from that date, deemed to be
opening balances in RTGS dollars at par with the USD at a rate of
one-to-one. Thereafter any variance in parity would be determined by
market forces on a willing-seller willing-buyer basis. Bond notes and
coins in circulation at the time would continue to be legal tender
exchangeable at parity with the RTGS dollar on the same ratio of
one-to-one.
[9] All
the aforesaid changes and reforms would formally be incorporated into
the statute books, primarily through appropriate amendments to the
Reserve Bank Act. The details are not important for the moment, save
just to mention that this is the gamut of the legislation the
applicants want knocked down. They aver that watching those changes
from 2016, they feared the value of their deposit would devalue
significantly. To them, the unfolding situation was not without
precedence. They cite the bearer cheque dispensation of 2007 and 2008
when inflation had risen phenomenally. Money would be counted in
quintillions of dollars. When the economy had dollarized, people's
savings had been wiped out. Therefore, to avert another disaster, the
applicants say they instructed the first respondent, on 28 November
2016, to “freeze”
their account so that no deposits or withdrawals from it would be
effected except upon the written instructions by the authorised
signatories. It did not work. The first respondent cited the policy
and legislative changes above and said it had to comply.
[10] The
applicants aver that their bank account which previously reflected a
balance of USD142,000 now reflected the same figure but in RTGS. Due
to the movement of the exchange rate between the USD and the RTGS
dollar and the depreciation of the RTGS dollar against all the other
major currencies, the applicants allege that their deposit has become
a minuscule fraction of its original value. They submit that this
cannot be right. They will not accept it. Apparently neither will so
many other customers.
So, in 2019 the applicants sued the first respondent, their bank, on
the basis of the banker-customer principles of the common law. In the
alternative, they sued the monetary authorities, the second and third
respondents, in the main impugning Exchange Control Directive
RT120/2018. As mentioned at the beginning of this judgment, the
applicants cause found favour with this court. But they lost on
appeal. They are now back again in this court, their cause of action
having been re-formulated. But inevitably, and quite
characteristically in matters such as this, the court has been called
upon to first determine the numerous points in
limine
which have been raised by the respondents. These are dealt with
below, not necessarily in the order that they have been raised in the
affidavits, but rather on the basis of their individual likelihood or
potential to dispose of the entire application without going into the
merits.
[C] POINTS
IN LIMINE
[i] Matter
is res
judicata or
issue estoppel
[11] The
second respondent alleges that by reason of the doctrine of res
judicata
or issue estoppel, the applicants are barred or estopped from
bringing this claim in the form that they have, or at all. Singled
out for impeachment under this objection are paras 1, 2, 3, 7, 8 and
9 in the applicants draft order. Respectively, these are the
paragraphs alleging that the Exchange Control Directive RT120/2018 is
unconstitutional; that it is ultra
vires
the Exchange Control Regulations, 1996; that section 44B(3) and (4)
of the Reserve Bank Act are unconstitutional; that the first
respondent should refund them the contentious USD142,000 together
with interest and costs of suit on the higher scale. Paras 4, 5 and 6
that the second respondent has not expressly singled out respectively
contain the claim for the impeachment of section 44C of the Reserve
Bank Act; the impeachment of certain provisions of the Finance (No.2)
Act of 2019
and the impeachment of the act of converting the applicants bank
balance from USD142,000 to RTGS142,000, all on the basis of
unconstitutionality.
[12] The
second respondent argues that the substance
of the applicants claim then and now was, and is the payment of
USD142,000 irrespective of the form
in which it was, and is being pleaded. It further argues that this
substantive claim was determined to finality by both this court and
the Supreme Court. In particular, this court declared the Exchange
Control Directive RT120/2018 invalid. It then went on to order the
first respondent to refund the applicants the USD142,000 in question.
But the judgment of this court was vacated by the Supreme Court.
There ended the case. There is no right of appeal beyond the Supreme
Court. The second respondent cites widely case authorities from
around the globe on res
judicata
and issue estoppel.
[13] Many
jurists and scholars, here and abroad, have written extensively on
res
judicata
and issue estoppel. Without in any way being presumptuous and
pre-emptive, it is doubtful whether there remains anything that can
usefully be added to the body of knowledge on this subject. So, I
merely paraphrase the principles. Issue estoppel is a species of res
judicata:
Munemo
v Muswera
1987 (1) ZLR 20 (SC), at p23C. They are almost analogous concepts:
Galante
v Galante (1)
2002 (1) ZLR 144 (H), 151A. Issue estoppel has been described in
Mills
v Cooper
[1967] 2 ER 100, per
LORD DIPLOCK, as follows:
“A
party to civil proceedings is not entitled to make, as against the
other party, an assertion, whether of fact or of legal consequences
of facts, the correctness of which is an essential element in his
cause of action or defence, if the same assertion was an essential
element in his previous cause of action or defence in previous
proceedings between the same parties or their predecessors in title
and was found by a court of competent jurisdiction in such previous
civil proceedings to be incorrect, unless further material which is
relevant to the correctness or incorrectness of the assertion and
could not by reasonable diligence have been adduced by that party in
the previous proceedings has since become available to him.”
In
Carl
Zeiss Stiftung v Rayner & Keeler
[1976] 1 AC 853,
the three essential requirements of res
judicata
or issue estoppel were listed as follows:
(i)
that the same question has been decided;
(ii)
that the judicial decision which is said to create the estoppel was
final; and
(iii)
that the parties to the judicial decision or their privies were the
same persons as the parties to the proceedings in which estoppel is
raised.
[14] I
disagree with the second respondent that the applicants are estopped
from bringing their claim in the manner that they have. Admittedly,
the impeachment of the Exchange Control Directive RT120/2018 and
section 44B(3) and (4) of the Reserve Bank Act had been issues before
the courts in the applicants previous claim, albeit as alternative
claims. Admittedly, this court had gone on to determine the issue of
the constitutional validity of the Exchange Control Directive. It had
expressly declined to determine the constitutional validity of
section 44B(3) and (4) of the Reserve Bank Act on the grounds that it
had become unnecessary to do so. The Supreme Court, in judgment No SC
15-21,
declared the whole approach by this court a
faux pas.
According to the appellate court, and in summary, the applicant's
main claim being one ad
pecuniam solvendum,
[i.e. a claim for the payment of a sum of money]; that claim having
been made expressly against the first respondent only; this court
having found against the applicants on it; the claim for the
constitutional invalidity of, inter
alia,
Exchange Control Directive RT120/2018 not having been made at all,
this court had gone on a frolic of its own to assume that it could
determine that aspect of the claim. What is worse, according to the
appellate court, this court had gone on to pronounce judgment against
the first respondent in circumstances in which neither the
constitutional validity of the Exchange Control Directive RT120/2018
had been pleaded by the applicants as against the first respondent,
nor the conditions dealt with by this court argued by any of the
parties in those proceedings. On that basis the appellate court set
aside the judgment of this court in its entirety.
[15] I
disagree that in the present application issue estoppel or res
judicata
can be invoked successfully for the reason that the Supreme Court has
determined that the consideration of the constitutionality of the
Exchange Control Directive RT120/2018 had not been properly motivated
before this court in those proceedings and had therefore been
improperly decided. The decision of this court on that point has been
vacated. Manifestly, it remains open. In other words, the question of
the constitutional validity of the Exchange Control Directive
RT120/2018 and of section 44B(3) and (4) of the Reserve Bank Act has
not been determined. The respondents cannot approbate and reprobate.
Their argument before the Supreme Court that the finding by this
court against the applicants prayer for an order ad
pecuniam solvendum
should have signalled the end of the case for the applicants was
upheld. It was their further argument, which was also upheld, that it
was this court, not the applicants, which had improperly formulated
the cause of action on which it had eventually granted them relief.
In this respect, and quite plainly, the applicants cannot be barred
from formulating their cause of action for themselves. On the facts,
what is manifestly issue estoppel, among other things, is the claim
ad
pecuniam solvendum
in respect of the amount in question, on the basis of the
banker-customer relationship and in the face of the Exchange Control
Directive RT120/2018 and/or its legislative backbone. This court
considers that res
judicata,
or issue estoppel, are even far removed in relation to the
legislative provisions that the applicants have cited for
impeachment. In the previous judgment, this court expressly declined
to determine those provisions that the applicants had specifically
cited, namely section 44B(3) and (4) of the Reserve Bank Act, on the
basis that it had become unnecessary to do so. The rest of the other
legislative provisions, now forming part of the gamut of laws the
applicants want struck down, have not been raised before. So
naturally, they have never been determined.
[16] The
court is alive to the public policy rationale behind the doctrine of
res
judicata
or issue estoppel. It is to bring finality to litigation and to give
effect to judicial decisions even if they may be wrong: Wolfenden
v Jackson
1985 (2) ZLR 313 (SC), 316B–C. In Willowvale
Motor Industries v Sunshine Rent-a-Car
1996 (1) ZLR 415 (S), the Supreme Court said, per
KHOSA JA:
“While
the doctrine of issue estoppel may not be part of the Roman-Dutch law
and may not as yet have found a berth in South African law, it seems
to me that this court, in the wider application of existing law in
the light of current modes of thought, has found the artificiality of
limiting estoppel to the same subject to be unproductive of justice,
and has embraced the doctrine of issue estoppel under the general
rule of public policy that there should be finality in litigation.”
[17] However,
the public policy rationale would be overriding if all the elements
of these doctrines are present in any given case. The substance of
the argument by Mr Uriri,
for the second respondent, and as I have understood it, is that all
what the applicants seek is the return of their money, that this
claim has since been determined to finality and that the issue of the
Exchange Control Directive RT120/2018, being the backbone of their
claim in whatever form, had also been determined in the previous
proceedings. However, this argument fails on the same basis that the
issue of the constitutionality of the Directive and of those
legislative provisions was not determined, either to finality, or at
all. For these reasons, the second respondent's point in
limine
on res
judicata or
issue estoppel is hereby dismissed.
[ii] Applicants
reliance on section 85(1)(a) is incompetent
[18] Another
point in
limine
raised by the second respondent is that the applicants claim being
for the nullification of Exchange Control Directive RT120/2018 on the
basis that it is ultra
vires
section 35(1) of the Exchange Control Regulations, 1996, and the
consequential claim for the return of the contentious USD142,000,
together with the corollary claims for interest and costs thereon,
the doctrine of subsidiarity in constitutional matters is such that
this court is precluded from determining the claim as a
constitutional matter under section 85(1)(a) of the Constitution of
Zimbabwe. Section 85(1)(a) of the Constitution of Zimbabwe entitles
any person acting in their own interests to approach a court for the
vindication of a fundamental right or freedom, as enshrined, which
may have been, or is being, or is likely to being infringed. Mr Uriri
argues that it is incompetent for one to seek a relief that can be
granted under some other law or legislation without invoking a
constitutional provision because norms of greater specificity should
be relied upon before resorting to norms of greater abstraction.
[19] The
constitutional principle of subsidiarity says that a litigant who
avers that his or her constitutional right has been infringed must
rely on the legislation that was enacted to protect that right. He or
she may not rely directly on the underlying constitutional provision
in proceedings which have been brought to protect that right unless
he or she wants to attack the constitutional validity or efficacy of
the legislation itself: Majome
v Zimbabwe Broadcasting Corporation & Ors
2016 (2) ZLR 27 (CC); Moyo
v Chacha & Ors
2017 (2) ZLR 142 (CC). Once legislation to fulfil a constitutional
right exists, the constitution's embodiment of that right is no
longer the prime mechanism for enforcement. The legislation is
primary. The right in the constitution plays only a subsidiary or
supporting role: Mazibuko
& Ors v City of Johannesburg & Ors
[2009] ZACC 28. Mr Uriri's
point is that in the present case, the validity of the Exchange
Control Directive RT120/2018 can simply be tested against section
35(1) of the Exchange Control Regulations, 1996, without invoking the
constitutional provision.
[20] The
situation now appears such a procedural bog and a legal minefield. It
will be remembered that as one of the reasons for upsetting the
judgment of this court in the previous proceedings, the Supreme Court
held that this court's unprompted consideration of the
constitutionality or otherwise of the Exchange Control Directive
RT120/2018 violated the doctrine of subsidiarity in constitutional
matters. The appellate court said that it had been incumbent for
this court to consider and determine the constitutional validity of
section 44B(3) and (4) of the Reserve Bank Act before addressing the
validity of the Exchange Control Directive RT120/2018 itself, not
only because the applicants had specifically sought such relief, but
also on the basis of the principle of subsidiarity. Now it seems as
if the applicants have simply wheeled back into the present
proceedings the same problems and the same issues as before. However,
that does not seem to be the case. The applicants do seek the setting
aside of section 44B(3) and (4) of the Reserve Bank Act on the basis
of constitutional invalidity. It is just that in their draft order
the remedies sought are arranged in such a way that the order for the
impeachment of the Exchange Control Directive RT120/2018 comes first
ahead of the order for the impeachment of the statutory provisions.
The applicants also seek the impeachment of the other statutory
provisions. But none of all this should be a reason to non-suit them,
or else the whole approach would sound pedantic and a miscarriage of
justice.
[21] Whilst
the Exchange Control Directive RT120/2018 purported to address the
multiple problems dogging the economy at that time, and possibly now,
its intrinsic component about which the applicants are severely
aggrieved, was the conversion of their deposit from USD to RTGS. The
prelude to this conversion was firstly, the aforesaid SI 133 of
2016,
which became section 44B(3) and (4) of the Reserve Bank Act. Those
intrinsic provisions of the Exchange Control Directive RT120/2018
were also cemented by section 21 of the Finance (No.2) Act No.7 of
2019 the provisions of which eventually became section 44C of the
Reserve Bank Act. The one-to-one parity ratio of the RTGS to the USD
became expressed in section 22 of the Finance (No.2) Act aforesaid.
It is all these statutory provisions that the applicants want struck
down on the grounds of constitutional invalidity. There is therefore
nothing precluding this court, in the present proceedings, from
determining the constitutional validity of the intrinsic provisions
of the Exchange Control Directive RT120/2018.
[22] Holistically,
what the applicants want in these proceedings is the impeachment of
the device by which the monetary authorities managed to convert their
USD142,000 bank balance into an RTGS bank balance, and thereafter to
be able to stop the applicants from accessing the amount in the
original currency of the deposit. The applicants suit is an omnibus
approach, presumably because the device employed by the monetary
authorities to achieve their goals was not a single statute or
directive, but a series of new laws or amendments. But significantly,
in paragraph 6 of the draft order, the applicants seek the setting
aside of the conversion of their USD142,000 to RTGS142,000 on the
basis of unconstitutionality, specifically section 71 of the
Constitution. This is the crux of the dispute. It shall be the focus
of the determination. For these reasons, the second respondent's
objection No.2 is hereby dismissed.
[23] There
remains the aspect of the Exchange Control Directive RT120/2018
allegedly being ultra
vires
the enabling legislation, namely section 35(1) of the Exchange
Control Regulations. Unhappily, counsel have not exhaustively and
systematically synthesised this particular point, either in their
heads of argument or in oral submissions. But evidently, the
applicants can properly motivate the impeachment of the Exchange
Control Directive RT120/2018 on the basis that it is ultra
vires
section 35(1) of the Exchange Control Regulations. In that regard,
there would be no constitutional point before the court. This is a
separate enquiry which is not constricted by what went on before.
[iii] Applicants
claim in foreign currency is incompetent by operation of the law
[24] The
third objection by the second respondent, as I have appreciated it,
is that the applicants demand to be paid in USD cannot be met because
following the enactment of SI 33 of 2019 aforesaid,
all debts previously denominated in USD became debts payable in RTGS
from the effective date. For support, the second respondent refers to
the case of Zambezi
Gas (Pvt) Ltd v N.R. Barber (Pvt) Ltd & Anor
SC 3-20 which determined that in line with SI 33 of 2019, the assets
and liabilities expressed in USD immediately before the effective
date, 22 February 2019, became assets and liabilities in RTGS,
irrespective of their origins. The second respondent argues that the
relationship between the applicants and the second respondent being
one of creditor and creditor in terms of banking law and that the
applicants claim being for payment of a debt in USD, this is not
competent for as long as SI 33 of 2019 is still extant
and when the judgment of the Supreme Court above is still the law.
With all due deference, I need not be detained by this objection. The
constitutionality of SI 33 of 2019 is part of the raft of legislation
that is under challenge. It is SI 33 of 2019 that eventually became
section 44C of the Reserve Bank Act. It also became section 22 of the
Finance (No.2) Act No.7 of 2019. The applicants want all these set
aside. Therefore, this point cannot be determined as a preliminary
objection. It is part of the merits of the case. It was not before
the appellate court in the Zambezi
Gas
case above. Therefore, as a preliminary objection it is hereby
dismissed.
[iv] Applicants
draft order is defective
[25] The
first respondent's sole point in
limine,
distilled, is that it is incompetent for the applicants to seek a
declaration of invalidity of the range of legislation that they have
singled out, and then, in the same claim, seek consequential relief
in the form of an order directing the respondents to pay back the
USD142,000 in contention. The first respondent's point is that in
terms of section 175(1) of the Constitution, a declaration of
constitutional invalidity made by any court has no force until
confirmed by the Constitutional Court. The first respondent avers
that the applicants are seeking to be paid the money before any order
of constitutional invalidity which this court may make is confirmed
by the Constitutional Court. The first respondent concludes that by
reason of the fact that the applicants draft order fails to reflect
this position, it is fatally defective. The defect cannot be cured by
an amendment. As such, the application ought to fail in its entirety.
[26] With
all due respect, this objection lacks merit. By operation of the law,
any declaration of unconstitutionality this court or any other may
make, stands suspended until confirmed by the Constitutional Court.
That should mean that any consequential relief that the court may see
fit to grant also stands suspended until the declaration of
unconstitutionality is confirmed. If the unconstitutionality is not
confirmed, then the consequential relief that is based upon the
constitutional point should automatically fall away. But such a
position cannot preclude a litigant from claiming consequential
relief where a declaration of constitutional invalidity is sought. He
or she brings his or her claims in one motion to avoid a multiplicity
of proceedings. The first respondent's objection is hereby
dismissed. That paves the way for the determination of the case on
the merits.
[D] ISSUES
FOR DETERMINATION ON THE MERITS
[27] In
respect of the constitutional matter, the applicants seek the setting
aside of the Exchange Control Directive RT120/2018 and a raft of some
legislative provisions, being section 44B(3) and (4), and section 44C
of the Reserve Bank Act; section 22(1)(b) and (d), section 22(4)(a)
and section 23(1) and (2) of the Finance (No.2) Act, No.7 of 2019. In
reality, and as stated already, the applicants dominant and overall
desire is the reversal of the act of the conversion by the first
respondent of their bank deposit in the sum of $142,000 from USD to
RTGS, which they allege was done on the authority of the monetary
policy statements, the Exchange Control Directive RT120/2018, and the
legislative architecture as set out above. The applicants allege the
process was an infringement of their constitutional right to
property. Therefore, it is necessary to determine the
constitutionality or otherwise of the act of that conversion as
prayed for in para 6 of the draft order. Manifestly, this is a claim
for a declaratur
under section 85(1) of the Constitution. As in all claims for
declaratory orders, a court does not decide abstract or hypothetical
questions: Munn
Publishing (Pvt) Ltd v Zimbabwe Broadcasting Corporation
1994 (1) ZLR 337 (S); 1995 (4) SA 675 (S), [1995] 3 All SA 444 (Z);
and Johnsen
v Agricultural Finance Corp
1995 (1) ZLR 65 (S). Therefore, only such core provisions of the
Exchange Control Directive RT120/2018 and the impugned statutes as
had the authority claimed and used by the second and third
respondents to the prejudice of the applicants, as alleged, fall for
consideration, not the rest of the other provisions. However, in the
present proceedings, it is necessary to first determine the question
of the gross unreasonableness of the Exchange Control Directive
RT120/2018 and the argument that it is ultra
vires
section 35(1) of the Exchange Control Regulations, 1996, as these are
live and separate disputes.
[i] Exchange
Control Directive RT120/2018 is grossly unreasonable and ultra
vires
section 35(1) of Exchange Control Regulations 1996, SI 109 of 1996
[28] The
applicants argument that the Exchange Control Directive RT120/2018 is
grossly unreasonable and ultra
vires
section 35(1) of the Exchange Control Regulations, 1996 was not
properly synthesised. It is not altogether clear whether 'gross
unreasonableness' is a separate and stand-alone yardstick to be
considered on its own merits in testing the validity of the Exchange
Control Directive RT120/2018, or whether it is subsumed in the ultra
vires
doctrine argument. Mr Mafukidze,
for the applicants, starts from the premise that section 86(2) of the
Constitution permits the limitation of the rights and freedoms
enshrined in the Chapter 4 Declaration of Rights, but only in terms
of a law of general application, and to the extent that the
limitation is fair, reasonable, necessary and justifiable in a
democratic society based on openness, justice, human dignity,
equality and freedom. Asserting that the Exchange Control Regulations
1996, cannot themselves limit a Chapter 4 right given the
proscription in section 134 of the Constitution,
Mr Mafukidze
goes on to make a detailed analysis of the section 86(2) limitation,
not
in relation to the Exchange Control Regulations, but in relation to
the Exchange Control Directive. Thus 'gross unreasonableness' is
evidently a parameter to test the constitutionality of the Exchange
Control Directive, rather than a parameter to test the
constitutionality of the Exchange Control Regulations. But given the
nature of the dispute before the court, the determination of the
unconstitutionality or otherwise of the Exchange Control Directive
RT120/2018 is to be held over until the determination of its validity
on the basis of the ultra
vires
doctrine is made. The issue of the gross unreasonableness of the
Exchange Control Regulations, 1996, is not before the court.
[29] On
the ultra
vires
doctrine, the applicants argument is that section 35(1) of the
Exchange Control Regulations does not contain a limitation on their
right to retain the value of their bank deposit in the USD currency
and that, in any event, the Exchange Control Regulations 1996, do not
qualify to be a law of general application under section 86(2) of the
Constitution that can limit rights. The argument why the Exchange
Control Regulations 1996, cannot qualify to be a law of general
application as contemplated by section 86(2) of the Constitution has
not been developed. But clearly these Regulations are a law of
general application in respect of the subject matter of the dispute
before the court. They apply to everyone alike. The scope of the
limitation in section 86(2) is very wide. Apart from the enquiry
whether or not a law that purports to limit a right set out in the
Declaration of Rights under Chapter 4 of the Constitution is a law of
general application, the further enquiry is whether such a limitation
is fair, reasonable, necessary and justifiable in a democratic
society. The enquiry has to go further to whether such a democratic
society is one based on openness, justice, human dignity, equality
and freedom. It still has to go even further to take account of the
values set out in section 86(2)(a) to (f) relating to the nature of
the right or freedom concerned; the purpose, nature and extent of the
limitation in the public interest, and so on. In Woods
& Ors v Minister of Justice, Legal and Parliamentary Affairs &
Ors
1994 (2) ZLR 195 (S), the Supreme Court, conducting the same enquiry
in relation to one of the guaranteed rights under the old
Constitution, held:
“What
is reasonably justifiable in a democratic society is an elusive
concept. It is one that defies precise definition by the courts.
There is no legal yardstick, save that the quality of reasonableness
of the provision under attack is to be adjudged on whether it
arbitrarily or excessively invades the enjoyment of the guaranteed
right according to the standards of a society that has a proper
respect for the rights and freedoms of the individual.”
[30] In
paraphrase, the relevant portion of section 35(1) of the Exchange
Control Regulations 1996, compels authorised dealers to comply with
any such directions as may be given to them by an exchange control
authority in relation to, inter
alia,
the terms on which they are to exchange foreign currency for the
Zimbabwean currency. The origins of this power is section 317 of the
Constitution. As a central bank, the second respondent herein, is
empowered to regulate the monetary system; to protect the currency of
Zimbabwe in the interests of balanced and sustainable economic
growth, and to formulate and implement monetary policies. Then in
terms of section 6 and 7 of the Reserve Bank Act itself, the second
respondent is empowered to regulate Zimbabwe's monetary system; to
maintain the stability of the Zimbabwean dollar; to foster the
liquidity, solvency, stability and proper functioning of the
Zimbabwean dollar, and to make and issue bank notes and coins.
Finally, in terms of section 44C(4) of that Act,
the second respondent, in consultation with the third respondent, is
empowered to issue any direction in the public interest.
[31] Effectively,
the applicants concede that section 35(1) of the Exchange Control
Regulations 1996 is not ultra
vires
section 71 of the Constitution in the respects concerned. It is held
that indeed it is not. It does not purport to take away a right
enshrined in the Declaration of Rights under Chapter 4 of the
Constitution. In this respect, it is not unconstitutional. The
mandate that it grants the exchange control authorities in regards to
the exchange of any foreign currency for the Zimbabwean currency is
within the scope of the power vested in the second respondent by the
Constitution itself and the enabling Act.
[32] However,
the finding that section 35(1) of the Exchange Control Regulations
1996 is not ultra
vires
section 71 of the Constitution in the respects challenged is not the
end of the matter. The applicants argument, which is the first relief
claimed in the draft order, is that the Exchange Control Directive
RT120/2018 went beyond what its enabling law, section 35(1) of the
Exchange Control Regulations 1996, could itself do. The Directive
purported to take away or limit a Chapter 4 right. It is argued that
it did so by depriving the applicants their right to property as
enshrined in section 71 of the Constitution. The argument is that the
Exchange Control Directive RT120/2018, together with the statutes
that the applicants have impeached, arrogated to itself the power to
limit a Chapter 4 right. This argument will now be considered.
[ii] Breach
of section 71 of the Constitution by the Exchange Control Directive
RT120/2018; section 44B(3) and (4), and section 44C of the Reserve
Bank Act; section 22(1)(b) and (d), section 22(4)(a) and section
23(1) and (2) of the Finance (No.2) Act
[33] The
applicants argument, distilled, is that the parity ratio of
one-to-one of the RTGS vis-a-vis the USD was a fiction because the
two were not at par, even on inception. To demonstrate this
particular point, the applicants cite the second respondent's
monetary statement of 1 October 2018 aforesaid
in relation to the purchase of fuel in Zimbabwe by foreign truckers
and foreign traders buying goods in Zimbabwe. These payments had to
be made in foreign currency only. The applicants assert that this was
an admission that at the parallel market, the RTGS dollar was not at
par with the USD.
[34] As
a further illustration of the insincerity of the monetary authorities
on the purported par values of the currencies, the applicants point
out that when the auction system on the allocation of foreign
currency to traders and other users was incepted on 26 February 2019,
the RTGS dollar had already depreciated about two and a half times.
It continued to depreciate. They say at the time that they decided to
take legal action, the value of their deposit had dwindled more than
130 times. The aforesaid legislative architecture by the second and
third respondents unlawfully deprived them of the true value of their
original deposit. They allege that this was unconstitutional. A
credit balance in a bank account is a form of property. It is a right
protected by section 71 of the Constitution.
[35] In
counter, the respondents argue that by virtue of their constitutional
powers, and also in terms of the common law, and for the public
benefit, the second and third respondents, as monetary authorities,
have the sovereign right, power and mandate inter
alia
to formulate and implement fiscal policy in order to control the
supply or use of foreign currency. By that power or mandate, they
determine what may constitute legal tender in Zimbabwe. They can
issue bank notes and coins or they can designate something else as a
medium of exchange. They can peg the rate of exchange between the
local currency and any foreign currency. They can devalue the local
currency. The respondents also argue that the power to do all these
things is reposed solely and exclusively in the Executive and the
Legislative arms of Government, not the courts. It should be
recognized that by virtue of their bird's eye view of the economy,
their experience in governance, and given the information and
resources at their disposal, the Executive and the Legislature are
better placed to determine the fiscal policy of the country, not the
courts.
[36] The
respondents further argue that the separation of the peoples bank
balances into Nostro FCAs and RTGS FACs was done to strengthen the
multi-currency system, to conserve the scarce foreign currency, to
ease the burden of cash shortages, and so on, all in the interests of
export trade for the benefit of the entire economy. The applicants
have not shown that the deposits that flowed into their bank accounts
during the period of the multi-currency system were genuine USD
currency from off-shore sources, and not mere RTGS electronic
transfers. The applicants deposits did not stay in the bank accounts
for ever. The relationship between the applicants and the first
respondent was not one of depositum.
It was one of creditor and debtor in accordance with the well-known
principles of banking law. After making those deposits, the first
respondent was entitled to on-lend the amounts because money
deposited into a bank account by a customer becomes the property of
the bank, the customer merely retaining the right to the equivalent
amount upon demand. The change in the fiscal regime was through laws
of general application within the limitations of the rights and
freedoms in terms of section 86(2) of the Constitution. Everyone was
affected. Even the amounts lent by the first respondent denominated
in USD currency also became RTGS dollars when the change came. There
has been no constitutional breach committed by the second and third
respondents in announcing the various monetary policy statements,
issuing the Exchange Control Directive RT120/2018 and enacting the
various legislative provisions all of which the applicants impeach.
They acted within the scope of their powers.
[E] DETERMINATION
OF THE MATTER ON THE MERITS
[i] The
Issues and the Law
[37] The
applicants allege that the collective actions of the respondents, as
aforesaid, amounted to a deprivation of their right to property as
contemplated by section 71 of the Constitution. They argue that such
of the exceptions to deprivation as set out in section 71(3)(a) to
(c) have neither been claimed by the respondents nor are they
applicable in any event. After analysing the dichotomy between
'deprivation' and 'acquisition' in terms of both the old
Constitution and the current one, and relying extensively on case
authority on the subject, both from this jurisdiction and abroad, the
applicants argue that whilst deprivation may be different from
acquisition, the jurisprudence that has developed is such that there
can be no deprivation of a right to property by the State without
providing for compensation. Both parties have extensively analysed
the scope of the limitation of the rights and freedoms in terms of
section 86(2) of the Constitution, the applicants concluding that
none of the parameters set out therein apply, but the respondents
concluding that they do.
[38] The
right of the applicants to approach the court under section 85(1) of
the Constitution has not been contested, except as a point in
limine
in regards the ultra
vires
doctrine which has already been disposed of. Furthermore, given that
section 71(2) of the Constitution is dealing with a specific right
and freedom in a whole range of rights and freedoms found in Chapter
4 of the Constitution, and given that section 71(2) has its own set
of parameters for limiting this particular right and freedom, it is
not necessary for this court, as the parties have urged, to embark on
an analysis of the general limitation of rights and freedoms under
section 86(2) of the Constitution.
[39] The
power of Government to govern is unquestioned: Grandwell
Holdings (Pvt) Ltd v Minister of Mines and Mining Development
HH 193-16. Parliament has the right and power to pass laws for the
benefit of the country. It has the right to delegate the power to
make subsidiary legislation. This power or right derives from the
Constitution.
It also derives from the various statutes such as those under
impeachment. With very few exceptions, the Legislature and the
Executive have the right to monetary sovereignty. According to F. A.
Mann, The
Legal Aspects of Money,
4th
edn. Clarendon Press, Oxford, 1993, p267 and 464, this sovereignty
reposes the power to decide what may be legal tender, what is money,
what may be the currency in use, what nominal value to give to the
currency, appreciating or depreciating the value of the currency,
imposing exchange controls, and taking all other measures affecting
monetary relations. Local legislation, chiefly the Reserve Bank Act,
grants all such powers.
[40] Generally
speaking, it is not permissible for a court to interdict the exercise
of powers conferred by statute: Gool
v Minister of Justice & Anor
1955 (2) SA 682 (CPD) at 688F-G. A court must observe the
time-honoured doctrine of separation of powers. In Doctors
for Life International v Speaker of the National Assembly & Ors
2006 (6) SA 416 (CC) it was stated:
“Courts
must be conscious of the vital limits on judicial authority and the
Constitution's design to leave certain matters to other branches of
government. They too must observe the constitutional limits of their
authority. This means that the judiciary should not interfere in the
processes of other branches of government unless to do so is mandated
by the Constitution.”
The
same principle was also articulated in International
Trade Administration Commission v SCAW South Africa (Pty) Ltd
2012 (4) SA 618 (CC):
“Where
the Constitution or valid legislation has entrusted specific powers
and functions to a particular branch of government, courts may not
usurp that power or function by making a decision of their
preference. That would frustrate the balance of power implied in the
principle of separation of powers. The primary responsibility of a
court is not to make decisions reserved for or within the domain of
other branches of government, but rather to ensure that the concerned
branches of government exercise their authority within the bounds of
the Constitution. This would especially be so where the decision in
issue is policy-laden as well as polycentric.”
[41] However,
to every rule there is invariably an exception. In constitutionalism
there is always a corollary. The
wide range of powers enjoyed by the Executive and the Legislature is
not unchecked. It is not without limit. The power is not exercised
arbitrarily. Government cannot, in the name of sovereignty, invade
rights guaranteed by the Constitution unless the Constitution itself
permits it: Woods
& Ors, supra.
The dominant exhortation by the Constitution in laying out the powers
and functions of all the three arms of Government, the Executive, the
Legislature and the Judiciary, is that their authority derives from
the people of Zimbabwe and must be exercised in accordance with the
Constitution.
Legitimate State authority exists only within the confines of the
rule of law as embodied in, among others, section 3 of the
Constitution. It is the provision that expresses the founding values
and principles of Zimbabwe. In particular, the supremacy of the
Constitution; the rule of law; fundamental rights and freedoms and
good governance are singled out for special mention. In S
v Mabena
[2007] 2 All SA 137 (SCA), the Constitutional Court of South Africa,
addressing the same subject matter, said:
“The
Constitution proclaims the existence of a state that is founded on
the rule of law. Under such a regime legitimate state authority
exists only within the confines of the law, as it is embodied in the
Constitution that created it, and the purported exercise of such
authority other than in accordance with law is a nullity. That is the
cardinal tenet of the rule of law. It admits of no exception in
relation to the judicial authority of the state.”
Section
165(c) of the Constitution of Zimbabwe unequivocally announces the
role of the courts as being paramount in safeguarding human rights
and freedoms and the rule of law. The courts are bound to enforce the
provisions of the Constitution in regards to the substantive and
procedural requirements to be fulfilled by other constitutional
bodies:
Judicial
Service Commission v Zibani & Ors
2017 (2) ZLR 114 (S).
[42] The
applicants complaint is not without merit. The series of measures
adopted by Government in the name of reforms were undoubtedly harmful
to the banking public. The Executive has expressly admitted as much,
albeit, post
facto.
The applicants allegation that their deposit of USD142,000, which was
converted to RTGS, devalued more than 130 times by the time of
litigation, has not been contested. No one is compensating them. The
statement issued by the State President on 7 May 2022 dubbed
“Measures
to Restore Confidence, Preserve Value and Restore Macroeconomic
Stability”
does not seem to apply to the applicants, or to anyone else outside
the threshold of the amounts stated therein. That statement has been
admitted into evidence by consent. Under the heading “Restoration
of Lost Value on Bank deposits”
the statement reads:
“13 The
currency changeover of 2019 adversely affected the value of bank
deposits of the banking public mainly as a result of the depreciation
of the exchange rate. To address this value erosion, Government has
resolved to compensate the loss of value on bank deposits to
individuals who had funds in their bank accounts of US$1,000 and
below as of end of January 2019.
14 The compensation for amounts
less than US$1,000 has begun and will continue.
15 Currently a framework is also
being put in place to compensate individuals with bank accounts of up
to US$100,000.
16 The
amount required and implementation modalities of this policy will be
announced in due course guided by the Public Debt Management Act and
Reserve Bank of Zimbabwe.”
[43] The
above statement is plainly an express admission that the legislative
scheme by the second respondents to effect the currency change eroded
the values of bank deposits. According to the third respondent, the
rationale for such reforms was to address macro-economic problems
manifesting in the form of market distortions, liquidity crunches or
cash shortages. The measures were meant, among other things, to boost
the export capacity of the manufacturing industry so as to increase
the inflow of the foreign currency. While the rationale is
understood, the rationality of the measures taken are not. In its
judgment aforesaid,
albeit overturned on appeal, but on technical grounds, this court,
under the arbitrariness and reasonableness tests as values entrenched
in the Constitution, declared such measures irrational and set aside
the Exchange Control Directive. The reasoning of the court is
encapsulated in its statements below:
“The
first respondent cannot claim, as it seems to do, that the money it
owed to the applicant was not in United States dollars. The debt is
in United States dollars, because the account is denominated in that
currency. If it was in some other currency, such as the South African
Rand or Botswana Pula then that would have been the currency of the
account. The debt which the first respondent owes the applicant is
therefore in the sum of US$142,000.00 and not some other currency.
Banking would be meaningless if a person deposited a certain sum of
money or has money credited into their account only to be told when
they demand withdrawal that they can only be paid in some other means
of exchange whose value is determined by the authorities without
recourse to the holder of the account.
…
…
…
…
…
…
…
…
It
is offensive to any sense of justice that a person who holds money in
a bank can wake up on any day to be told that his money means
something else different from what has always been.”
[44] From
the papers in the current proceedings, what birthed the RTGS currency
was domestic borrowing by Government, coupled with the issuance of
treasure bills. To what extent, there is no information. At first
this currency did not have a name. But somehow, it had the effect of
diluting the USD currency. The USD currency had to be ring-fenced to
avoid the co-mingling effect with this currency. But some things just
do not add up. Quite how borrowing can create a currency has not been
rationally explained. It cannot. Money or a currency do not just
evolve on their own. According to the Reserve Bank Act, particularly
Part VI thereof, and in accordance with common law tenets of
sovereignty the world over, the designation of any chattel or thing
as money is a positive declaration by the State. The designation of
money as a medium of exchange is a positive declaration by the State.
The declaration of any type of currency in use in an economy is made
by the State. Money and currency cannot just incarnate in a formless
shape in a formless state. Manifestly, and according to section 44B
and section 44C of the Reserve Bank Act, it is the State that must
create them by declaration.
[45] It
will be remembered that at the time in contention, the local currency
had been demonetized, not only officially through SI 70 of 2015,
but also it had practically become non-existent on the ground. People
were now transacting almost exclusively in USD, at first in cash, but
subsequently electronically. That followed an express declaration by
the State. But apparently the local currency had never quite died
away. It still existed in some nameless form and in some formless
realm. The banking public was not told. Only later did the reality
unfold. Thus, whilst the banking public was being told that the money
in their accounts was USD, in reality it was not all USD. That
reality only hit the public when the Government rapidly instituted
the monetary changes aforesaid, by among other things, purporting to
introduce a new currency and proceeding to give it a name. That
conduct by Government could only have been a simulation because
according to its explanation herein, the currency had continued to
exist, albeit in its formless shape. That currency, even before being
officially gazetted, had the power, among other things, to dilute the
USD. But it is not explained what became of the $200 million
guarantee from Afreximbank the purpose of which had been to hedge
that currency against the USD so as to maintain the parity ratio of
one-to-one. That there was such a guarantee was not just a mere
policy statement, or announcement. It was actually enacted as a
statutory provision.
[46] The
modalities of the whole process of creating Nostro FCAs and RTGS FCAs
and the simultaneous separation of already existing bank balances
into USD and RTGS, depending on the source of the deposits, is not
properly explained. The second and third respondents allege that it
was left to the individual banks to use the KYC principles and trace
the source of the deposits that had flowed into the individual
customers accounts. But the first respondent has not explained how it
actually did it. If the nameless currency was co-mingling with the
genuine USD, then perhaps only the banks and the monetary authorities
themselves knew. Outside them, nobody else did. The multi-currency
dispensation was such that all transactions were predominantly, if
not exclusively, in USD. The local dollar had ceased to exist. The
banking public sometimes handled real cash in USD. It has not been
shown that of the $142,000 standing to the credit of the applicants
account with the first respondents at the relevant time, none of it
was from offshore sources. Given that the economy had practically
dollarized in the 2000s and given that the multi-currency system had
formally been incepted in 2009 by section 17 of the Finance (No.2)
Act of 2009, it was incumbent upon the respondents to demonstrate, in
the present proceedings, how, before the phasing out of the
multi-currency system and the prohibition on the use of foreign
currency as legal tender in Zimbabwe in 2019, and before the
re-introduction of the RTGS dollar in February 2019, it could be that
the applicants bank balance as at the time of separation was anything
other than USD. As highlighted before, the only explanation given is
that what passed on at the time as USD, was in fact, not all of it
USD. This is not rational.
[47] What
all this analysis boils down to is that the second and third
respondents, in effecting the currency reforms aforesaid, breached
one of the constitutional tenets of good governance as set out in
section 3(1)(h) of the Constitution. A government must not make, let
alone implement arbitrary decisions. It was held in Pharmaceutical
Manufacturers Association of South Africa: In re Ex Parte President
of the Republic of South Africa & Ors
2000 (2) SA 674 (CC) that:
“……
the
exercise of public power by the executive and other functionaries
should not be arbitrary. Decisions must be rationally related to the
purpose for which the power was given, otherwise they are in effect
arbitrary and inconsistent with this requirement.”
[48] Section
71 of the Constitution reads:
“(1)……………………
(2) Subject
to section 72, every person has the right, in any part of Zimbabwe,
to acquire, hold, occupy, use, transfer, hypothecate, lease or
dispose of all forms of property, either individually or in
association with others.
(3) Subject
to this section and to section 72, no person may be compulsorily
deprived of their property except where the following conditions are
satisfied—
(a) the
deprivation is in terms of a law of general application;
(b) the
deprivation is necessary for any of the following reasons —
(i) in
the interests of defence, public safety, public order, public
morality, public health or town and country planning; or
(ii) in
order to develop or use that or any other property for a purpose
beneficial to the community;
(c) the
law requires the acquiring authority —
(i) to
give reasonable notice of the intention to acquire the property to
everyone whose interest or right in the property would be affected by
the acquisition;
(ii) to
pay fair and adequate compensation for the acquisition before
acquiring the property or within a reasonable time after the
acquisition; and
(iii) if
the acquisition is contested, to apply to a competent court before
acquiring the property, or not later than thirty days after the
acquisition, for an order confirming the acquisition.”
[49] It
is not contested that the applicants, as customers, had a special
property interest in the value of the money in their bank account
with the first respondent: Standard
Bank of SA Ltd v Oneanate Investments (Pty) Ltd
1995 (4) SA 510 (C). It is beyond contest that such a right was one
protected under section 71(1) of the Constitution. Whilst the parties
herein have extensively debated whether the effect of the impugned
laws amounted to 'deprivation' or 'acquisition' or both
within the meaning of section 71(3) of the Constitution, it is not
disputed that the term 'deprive' or 'deprivation' is of wider
import than 'acquire' or 'acquisition'. Any interference with
the use, enjoyment or exploitation of private property involves some
deprivation: First
National Bank of SA t/a Wesbank v Commissioner of South African
Revenue Services & Anor; First National Bank of SA Ltd t/a
Wesbank v Minister of Finance 2002
(4) SA 768 (CC), para 57. In Greatermans
Stores (1979) (Pvt) Ltd & Anor v Minister of Labour & Anor
2018 (1) ZLR 335 (CC), the Constitutional Court of Zimbabwe,
stressing the distinction between 'deprivation' and 'acquisition'
held that deprivation does not necessarily amount to acquisition, or
the taking away of property by the State. It may be confined to the
imposition of restrictions on the use, enjoyment or exploitation of
the private property.
There is no question that what the second and third respondents did
when implementing the currency reforms as analysed above, deprived
the applicants of the right to the value of their deposit with the
first respondent. What is prohibited by section 71(3)(a) and (b) is
deprivation, unless certain conditions are met. Where the deprivation
amounts to an acquisition as well, as contemplated by section
71(3)(c), then, among other things, compensation has to be paid.
[50] It
cannot be disputed that the special property interest right such as
the applicants had in relation to their deposit of USD142,000
aforesaid was one which could legitimately be taken away if the
conditions listed in section 71(3)(b) of the Constitution were met.
The respondents argue that all of them were met. The applicants argue
that not only were they not met, but also that none of them has
specifically been relied upon by any of the respondents in the
present proceedings. The court finds merit in the position advanced
by the applicants. Whilst the deprivation might have been in terms of
a law of general application in terms of section 71(3)(a), among
other things, the reasons advanced by the respondents as the purpose
for which they deprived the applicants of their right, do not fall
within the constitutional framework of section 71(3)(b). Whilst the
third respondent explains that the currency reforms became necessary,
essentially to balance the Government books, to restore market
confidence, to shore up exports, to deal with the liquidity crunch,
and so on, critically, none of the specific interests listed in
section 71(3)(b) have been invoked or claimed. In terms of these,
deprivation should be in the interests of defence, public safety,
public order, public morality, public health or town and country and
planning.
[51] It
is not necessary to decide the question of the right to compensation
following an acquisition of property as provided for in section
71(3)(c) because, contrary to the applicants argument, what happened
was mere deprivation, not acquisition. As the Constitutional Court
made clear in the Greatermans
case above, acquisition means and implies the acquiring of the entire
title of the expropriated owner, whatever the nature or extent of
that right might be. The whole bundle of rights which vests in the
original owner passes to the acquirer.
That is not what happened in the present case. The applicants were
merely deprived of their right to property in breach of section 71(2)
of the Constitution. But such rights were not acquired by the State
as contemplated by section 71(3)(c) of the Constitution.
[ii] The
Impugned Laws
[52] The
impugned laws are so intertwined and almost inexorably linked to one
another. However, what is at the epicentre of the applicants
grievance as compacted under para 6 of their draft order, was the
conversion of their USD142,000 to RTGS142,000. Therefore, the task
for this court is to locate the particular legislative provision, or
provisions, in the whole gamut that has been impugned which the
respondents relied on as the basis for that conversion, in
contravention of section 71(2) of the Constitution. Unquestionably,
it was not the whole range of those laws as cited by the applicants.
The rest of them are in reality abstract questions and not the pith
of their dispute. Nonetheless, all the impugned laws are set out
below, those that do not call for determination being listed in
synoptic fashion for concision and context, and only those to be
impeached in
extenso
and verbatim. The latter category is further underlined for ease of
identification.
[a] The
Exchange Control Directive RT120/2018
[53] The
material portions of the Exchange Control Directive RT120/2018 read
as follows, the underlined paras 2.5 and 2.6 being considered by the
court as the harmful sting in the whole legislative matrix:
“Dear
Sir/Madam
DIRECTIVE ISSUED IN TERMS OF
SECTION 35(1) OF THE EXCHANGE CONTROL REGULATIONS STATUTORY
INSTRUMENT 109 OF 1996
1. Introduction
1.1 Reference is made to the
Monetary Policy Statement announced by the Reserve Bank Governor on
01 October 2018, which presented measures aimed at strengthening the
multicurrency system, enhancing business viability, price stability,
increasing export generation capacity and improving market
confidence. In order to operationalise these measures, Authorised
Dealers are advised as follows:
2. Separation
of Foreign Currency Accounts (FCAs) based on source of funds
2.1 Given the need to enhance
market confidence, promote transparency, preserve value, incentivise
generators of foreign exchange, promote effective and efficient
utilisation of foreign currency and strengthen the multicurrency
system, with immediate effect, FCAs are now separated according to
the source of funds.
2.2 In this regard, foreign
currency realised from offshore or foreign currency cash deposits
shall be eligible for creating into individual or corporate Nostro
FCA, while all Real Time Gross Settlement (RTGS) or mobile money
transfers and bond notes and coins deposits, shall be credited into
the individual or corporate RTGS FCA.
2.3 While these are the broad
classifications for the FCAs, Authorised Dealers shall for purposes
of ease of administration and for Exchange Control accounting,
separate the Nostro FCAs in terms of the source of foreign currency
as follows:
Table
1: Separation of Nostro FCA Accounts
Account
Designation Source
of Funds
1.
Nostro FCA (Exports) Export proceeds
2.
Nostro FCA (Offshore Loans) Offshore loan proceeds.
3.
Nostro FCA (Investments) Offshore funds provided by a foreign
investor
4.
Nostro FCA (Domestic) Foreign currency cash deposits from local trade
and foreign currency inflows Into Trust Accounts.
5.
Non-Resident Nostro FCA Funded from offshore sources by
non-residents.
6.
Individual Nostro FCA Funded with diaspora remittances, donations and
foreign currency cash deposits.
7.
Non-Governmental Organisation,
Embassies & International Funded with funds sourced from
offshore.
Organisations
Nostro FCA
8.
Bank Nostro FCA Funded with offshore funds intended for the benefit
of a bank, interest receipts, bank charges etc,
2.4 Authorised Dealers are also
advised to open Non-Resident RTGS FCAs to serve the same purpose of
the existing Transitory Accounts.
2.5 In
line with the Monetary Policy Statement, all
existing account balances should be separated into Nostro FCAs and
RTGS FCAs by 15 October 2018 and these accounts should be opened at
no cost using information already with banks. In separating the FCAs,
Authorised Dealers are required to use the Customer Due Diligence
(CDC) and Know Your Customer (KYC) principles to ensure a smooth
transition of this process.
2.6 Authorised
Dealers shall provide Exchange Control with an outcome of this
exercise through the completion and submission of the Exchange
Control FCA Balances Return by 1000hrs on 16 October 2018.
Thereafter, the return shall be submitted to Exchange Control on
daily basis by 1000hrs as in the current case.”
[b] The
Legislative Provisions
(i)
Section 44B(3) and (4) of the Reserve Bank Act
empowered the third respondent to prescribe, through a statutory
instrument, bond notes and coins as legal tender at par value with
the USD. There is nothing in this provision which is contrary to
section 71(2) of the Constitution.
(ii) Section
44C of the Reserve Bank Act empowered the second respondent to issue
an electronic currency which would become legal tender in Zimbabwe.
It also empowered the second respondent to issue, in the public
interest, any direction to promote the objective and smooth
implementation of the measures introduced by the provision. Again,
there is nothing in this provision which is contrary to section 71(2)
of the Constitution.
(iii) Section
22(1)(b) of the Finance (No.2) Act,
reads:
“(1)
Subject
to section 5, for the purposes of section 44C of the principal Act,
the Minister shall be deemed to have prescribed the following with
effect from the first effective date —
(a)
………… ; and
(b)
that
Real Time Gross Settlement system balances expressed in the United
States dollar (other than those referred to in section 44C(2) of the
principal Act), immediately before the first effective date, shall
from the first effective date be deemed to be opening balances in
RTGS dollars at par with the United States dollar;
and
(c)……………;
and
(d)
that,
for accounting and other purposes (including the discharge of
financial or contractual obligations), all assets and liabilities
that were, immediately before the first effective date, valued and
expressed in United States dollars (other than assets and liabilities
referred to in section 44C(2) of the principal Act) shall on the
first effective date be deemed to be values in RTGS dollars at a rate
of one-to-one to the United States dollar;
and………”
(iv) Section
22(4) of the Finance Act aforesaid reads:
“(4)
For the purposes of this section —
it
is declared for the avoidance of doubt that financial or contractual
obligations concluded or incurred before the first effective date,
that were valued and expressed in United States dollars (other than
assets and liabilities referred to in section 44C(2) of the
principal Act) shall on the first effective date be deemed to be
values in RTGS dollars at a rate of one-to-one to the United States
dollar;”
(v) Section
23(1) and (2) of the Finance Act aforesaid prohibited the use of any
foreign currency whatsoever as legal tender in any transaction in
Zimbabwe with effect from 24 June 2019. Specifically singled out for
mention, for the avoidance of doubt, were the British pound, the USD,
the South African rand and the Botswana pula. The Zimbabwe dollar was
declared the sole legal tender. However, the prohibition on the use
of foreign currency would not extend to the operation of Nostro FCAs
from which foreign payments could still be made. The prohibition also
would not affect the requirement to pay in foreign currency certain
import taxes on luxury goods. The court finds nothing that is
inherently contrary to section 71(2) of the Constitution.
[F] DISPOSITION
[54] The
aforesaid paras 2.5 and 2.6 of the Exchange Control Directive
RT120/2018 are impeachable because, among other things, they,
together with the legislative provisions specifically singled out,
were collectively the device by which the second and third
respondents improperly interfered with the contractual rights and
obligations as existing between the applicants and the first
respondent, resulting in, among other things, the deprivation of the
applicants right to property in breach of setion 71(2) of the
Constitution. Additionally, paras 2.5 and 2.6 of the Exchange Control
Directive RT120/2018 are ultra
vires
section 35(1) of the Exchange Control Regulations, 1996, in that they
purported to arrogate to themselves the power which the Exchange
Control Regulations did not have and, in the process purported to
invade rights protected under section 71(2) of the Constitution.
Accordingly, the following orders are hereby made:
(i) Paras
2.5 and 2.6 of the Exchange Control Directive RT120/2018 dated 4
October 2018 are ultra
vires
section 35(1) of the Exchange Control Regulations 1996, SI 109 of
1996, and are hereby set aside;
(ii) Subject
to section 175(1) of the Constitution of Zimbabwe —
1.
The conversion of the amount of USD142,000-00 standing to the credit
of the applicants savings account No.1005428905 with the first
respondent as at 28 November 2016 violated section 71 of the
Constitution.
2.
Paras 2.5 and 2.6 of the Exchange Control Directive RT120/2018
aforesaid violate section 71 of the Constitution.
3. Section
22(1)(b) and (d) and section 22(4)(a) of the Finance (No.2) Act No.7
of 2019 violate section 71 of the Constitution and are hereby set
aside.
4. The
first respondent shall pay the applicants the sum of USD142,000
together with interest thereon at the rate of 5% per annum from 28
November 2016 to the date of payment.
5. The
respondents shall the pay costs of suit jointly and severally, the
one paying the others to be absolved.
15
February 2023
Tendai
Biti Law,
applicants
legal practitioners
Mawere
Sibanda,
first respondent's legal practitioners
GN
Mlotshwa & Company,
second respondent's legal practitioners
Civil
Division of the Attorney-General's Office,
third respondent's legal practitioners
1.
Stone
& Anor v CABS & Ors
HH287-20
2.
CABS
& Ors v Stone & Ors
SC15-21
3.
By section 17 of the Finance (No.2) Act No.5 of 2009
4.
Reserve Bank of Zimbabwe (Demonetisation of Notes and Coins) Notice,
2015, SI 70 of 2015
5.
Presidential Powers (Temporary Measures) (Amendment of Reserve Bank
of Zimbabwe Act and Issue of Bond Notes) Regulations 2016, SI 133 of
2016
6.
Reserve Bank Amendment Act No.1 of 2017
7.
Section 1 thereof
8.
Section 44B(1) of the Reserve Bank Act
9.
SI 109 of 1996
10.
Presidential Powers (Temporary Measures) (Amendment of Reserve Bank
of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic
Dollars (RTGS Dollars) Regulations 2019, SI 33 of 2019
11.
As a matter of fact, there has been persistent litigation over the
same subject matter since the changes in the monetary regime
12.
Sections 22(1)(b), (d); section 22(4)(a) and (2) thereto
13.
At p468
14.
Quoted by KHOSA JA in Willowvale
Mazda Motor Industries v Sunshine Rent-a-Car
1996 (1) ZLR 415 (S), at p423D–F
15.
Quoted by KHOSA JA in Willowvale
Mazda Motor Industries, supra,
at p421–422
16.
CABS
& Ors v Stone & Ors
17.
At p423C
18.
Presidential Powers (Temporary Measures) Amendment of Reserve Bank of
Zimbabwe Act and Issue of Bond Notes) Regulations, 2019
19.
Presidential
Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe
Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS
Dollars) Regulations, 2019
20.
Which inter alia grants authority to Parliament to delegate its power
to make statutory instruments but with the circumscription that such
statutory instruments must not infringe or limit any of the rights
and freedoms enshrined in the Declaration of Rights
21.
At 199B–C
22.
An amendment introduced in 2019
23.
Monetary Policy Statement: Strengthening the Multi-currency System
for Value Preservation & Price Stability
24.
Section 117
25.
At Para 37
26.
At Para 95
27.
Section
88 of the Constitution for Executive authority; section 117 for
Legislative authority and section 162 for Judiciary authority
28.
In
para 2
29.
Stone
& Anor v CABS & Ors HH287-20
30.
Reserve Bank of Zimbabwe (Demonetisation of Notes and Coins) Notice,
2015
31.
Section 2 of the Reserve Bank of Zimbabwe Amendment Act No.1 of 2017
32.
At Para 85
33.
At 360C–D
34.
At
360D
35.
Inserted by the Reserve Bank of Zimbabwe Amendment Act, No.1 of 2017
36.
No.7 of 2019
37.
22
February 2023
