Elisha Tonderai Kafesu v Afrasia Bank Zimbabwe (Under Financial Liquidation) and Others

The applicant occupied a property (stand 3535 Umtali Township) as a condition of employment with Redstar Wholesalers. The property was sold to the first respondent (Afrasia Bank Zimbabwe) in 2012, which allowed the applicant to remain as a tenant. Between 2013 and 2015, the applicant made several offers to purchase the property on credit terms. The bank declined credit terms and indicated it would only accept cash payment of USD50,000. On 22 January 2015, the applicant offered USD50,000 on credit terms. On 5 February 2015, the applicant paid USD40,000 as a deposit to Mambosasa Legal Practitioners. On 24 February 2015, the bank surrendered its banking licence to the Reserve Bank of Zimbabwe and was placed under liquidation on 29 April 2015. The applicant alleged that an oral agreement was concluded which was reflected in a written agreement he signed but which was never signed by the bank. The liquidator (Grant Thornton as liquidator agent) refused to recognize the alleged agreement. The applicant sought confirmation of the agreement and transfer of the property.

• Whether the applicant exhausted domestic remedies under section 223 of the Companies Act before approaching the court
• Whether the non-joinder of the liquidator as a party to the proceedings was fatal to the application
• Whether a valid and binding agreement of sale existed between the applicant and the first respondent
• Whether the relief sought (confirmation of an alleged agreement) was competent
• Whether the court could conclude a contract on behalf of parties where no valid agreement existed

The application was dismissed with costs. The Registrar of the High Court was instructed to bring the judgment to the attention of the Law Society of Zimbabwe regarding the conduct of Philip Nyakuedzwa.

1. Section 222(3) of the Companies Act requires that an aggrieved person challenging a liquidator's decision must proceed by notice of motion to the liquidator, and failure to cite the liquidator as a party is fatal to the application. 2. Upon commencement of winding up, the powers of directors cease and vest in the liquidator, who becomes an essential party to proceedings affecting the company's affairs. 3. For a company to be bound by an agreement, a valid board resolution must authorize the transaction, or the company must ratify the agreement expressly or tacitly. In the absence of such authorization or ratification, no valid agreement exists. 4. Courts cannot confirm or conclude contracts on behalf of parties where no valid agreement has been proven to exist. 5. Section 223 of the Companies Act concerns complaints about the manner in which a liquidator exercises responsibilities (conduct), not challenges to the correctness of liquidator decisions.

The court made important observations about legal ethics and lawyer-client privilege. CHATUKUTA J noted that Philip Nyakuedzwa, who had been the bank's legal practitioner, acted in breach of client-attorney privilege by disclosing confidential information about the bank's instructions to him and by deposing to an affidavit supporting the applicant against his former client. The court emphasized the sanctity of lawyer-client privilege, citing ZFC v Furusa SC 15/2018 and Law Society v Minister of Transport & Communications 2004 (1) ZLR 257 (S), noting that such privilege exists not only in litigation but extends to advice sought to regulate affairs, and even overrides policy considerations in some circumstances. The court found Nyakuedzwa's conduct sufficiently concerning to direct that the judgment be brought to the attention of the Law Society of Zimbabwe. The court also explained the liquidation regime under the Banking Act, noting that section 57(1) makes it peremptory that the Deposit Protection Corporation be appointed as liquidator of banking institutions, and that the Corporation may appoint agents under section 38(1) of the Deposit Protection Corporation Act, which explained Grant Thornton's role as liquidator agent.

This case clarifies important principles regarding liquidation proceedings under the Banking Act and Companies Act in Zimbabwe. It establishes the distinction between section 223 (complaints about liquidator conduct) and section 222(3) (challenging liquidator decisions) of the Companies Act. It reinforces that when a company is under liquidation, the liquidator must be cited as a party to proceedings challenging their decisions. The case emphasizes fundamental contract law principles that companies can only be bound by acts authorized through proper corporate resolutions and that courts cannot create contracts for parties. It also serves as an important reminder of the sanctity of lawyer-client privilege and the ethical obligations of legal practitioners not to act in conflict or disclose confidential information.