The four appellants were companies registered in Zimbabwe and subsidiaries of BST Holdings (Private) Limited. Each maintained two bank accounts with the respondent bank: an RTGS account (Zimbabwean Dollars) and a Foreign Currency Account (FCA) in US Dollars. In 2018, the first to third appellants accessed large amounts of foreign currency from the respondent to meet offshore obligations using their RTGS credit balances, even though their FCA accounts were unfunded or underfunded. Two of the respondent's employees, Kundai Dube and Albert Chapatorongo, facilitated these transactions without following proper procedures. When suspended, both employees resigned immediately. To correct the anomalies, the respondent debited the appellants' FCA accounts with the amounts paid and simultaneously credited their RTGS accounts with the same amounts. This action was extended to the fourth appellant as the respondent treated all four appellants as a single economic entity (same directorship and shareholding, with inter-party payments). The appellants sought declaratory relief that the respondent's debiting of their FCA accounts was unlawful and sought restoration of the debited amounts.
The appeal was dismissed with costs.
The binding legal principles established are: (1) A bank is entitled to reverse irregular transactions and debit a customer's account to correct an overdraft created by unauthorized transactions, even without the customer's consent, where the contract provides for such powers; (2) The contractual power of a bank to combine and set-off accounts (as provided in clause 6 of the banking agreement) can be exercised where there are irregular transactions creating overdrafts, and courts must give effect to clear and unambiguous contractual terms; (3) When a customer's account becomes overdrawn due to irregular transactions, it is the customer who must bear the loss and make good the overdraft, not the bank; (4) The corporate veil may be pierced to treat separate corporate entities as a single economic unit where there is common ownership, control, directorship, and inter-company transactions, even in the absence of fraud; (5) An appeal court cannot consider issues that were not properly raised before the lower court; (6) The caveat subscriptor rule binds parties to the ordinary meaning and effect of the words in contracts they have signed.
The court made several non-binding observations: (1) The communications between the appellants' representatives and the bank employees at odd hours (such as 4 am) and the evidence of possible bribes suggested improper conduct; (2) The appellants accessed foreign currency of USD$1,257,560.72 in a period of 52 days during an acute shortage of foreign currency in the country, which was highly irregular; (3) The court noted that strict adherence to the principle of separate corporate identity would prevent the respondent from correcting the overdraft incurred by the second appellant; (4) The court observed that clause 6.5.2 of the Reserve Bank of Zimbabwe Consumer Protection Prudential Standards BSD1/2017 was not applicable as it applies to banks receiving funds in error, not to the situation in this case; (5) The court noted that considerations of policy tend to militate against legal separation of integral units of an economic group where operations are virtually indivisible, as doing so would perpetuate an essentially corporate fiction.
This case establishes important principles in Zimbabwean banking law regarding: (1) the bank's right to reverse irregular transactions and correct overdrawn accounts resulting from unauthorized or irregular transactions; (2) the application of contractual provisions allowing banks to combine and set-off customer accounts without prior consultation where such provisions are clearly stipulated; (3) the extension of the corporate veil piercing doctrine beyond fraud to situations involving single economic entities with common control, ownership, and operations; (4) the duty of customers to bear losses resulting from unauthorized overdrafts in their accounts; (5) the importance of following proper banking procedures for accessing foreign currency; and (6) the principle that courts are bound to honour freely entered contracts and cannot rewrite them even if they appear onerous. The case also reinforces that appellate courts will not interfere with factual findings unless they are grossly unreasonable.