Deposit Protection Corporation (representing Afrasia Bank Limited under liquidation) v Drummond Ranching (Private) Limited and Others

The Deposit Protection Corporation (representing Afrasia Bank Limited, formerly Kingdom Bank Limited, under liquidation) claimed payment of US$2,506,132.86 from Drummond Ranching (Private) Limited and seven other defendants who acted as sureties and/or provided security through mortgage bonds. The claim arose from a global finance facility of US$1.8 million availed to the first defendant on 19 April 2012, with an expiry date of 30 April 2014. The first defendant accessed funds under the facility. The defendants admitted that facilities were extended and that the second to eighth defendants stood as sureties and co-principal debtors, but disputed the amount owed, the expiry date, and the interest rate. They also alleged that the plaintiff failed to honour instruments drawn on the facility even when funds were available, causing losses to the first defendant's business. The seventh defendant, Kenneth David Drummond, testified that the first defendant accessed approximately one million dollars, not the full facility amount.

• Whether the plaintiff proved the amount owed by the first defendant on a balance of probabilities
• What amount was actually withdrawn under the facility agreement
• What interest rate should apply given the plaintiff's breach of the facility agreement
• Whether the plaintiff contributed to the first defendant's default by failing to honour transactions
• Whether the plaintiff could recover both collection commission and attorney-client costs

Judgment granted in favor of the plaintiff but for a reduced amount. The defendants were ordered jointly and severally to pay the plaintiff US$2,170,873.42 (instead of the claimed US$2,506,132.86) together with interest at 18% above LIBOR per annum (not the penalty default rate) from 28 May 2014 to date of payment in full. The defendants were ordered to pay either collection commission calculated per Law Society By-Laws or attorney-client costs, at the plaintiff's election, but not both.

Where a creditor contributes to a debtor's default through breach of contractual obligations (such as failing to honour instruments drawn on a facility), it is unconscionable and inequitable for the creditor to recover penalty or default interest rates; instead, ordinary contractual interest rates should apply. A plaintiff claiming a debt must prove the exact amount claimed; where discrepancies exist between claimed amounts and supporting documentation, only the proved amount in supporting schedules will be awarded. A plaintiff cannot recover both collection commission and attorney-client costs as this would constitute double recovery; the plaintiff must elect between the two.

Zhou J made significant obiter observations calling for reform of banking laws in Zimbabwe. The judge stated: "This case calls for a serious rethinking of the banking laws of this country. Banking business is sensitive to the economy of a country and must be reserved for those who can properly run such institutions. The Legislature must seriously consider imposing strict liability upon those responsible for managing banks and other financial institutions which go into liquidation and in the process also liquidate their clients. The personal liability of the directors of financial institutions, both criminally and delictually, will ensure that only those who are professionally competent accept or take up management positions in financial institutions." These comments, while not binding, reflect judicial concern about the impact of banking failures on the economy and clients.

This case is significant for establishing principles regarding: (1) the evidentiary burden on financial institutions to prove the exact amount of debt claimed, not merely relying on certificates of indebtedness without supporting documentation; (2) the principle that a creditor who contributes to a debtor's default cannot claim penalty interest rates; (3) the prohibition against double recovery of both collection commission and attorney-client costs; and (4) the court's obiter comments calling for legislative reform to impose strict personal liability on directors of financial institutions to protect the economy and clients. The case highlights the courts' willingness to apply equitable principles to prevent unconscionable outcomes in banking disputes, particularly where the bank's own conduct contributed to the debtor's difficulties.