Kurt Micheal Reitz v Standard Chartered Bank of Zimbabwe Limited and Coghlan Welsh and Guest (Incorporating Stumbles and Rowe)

Kurt Reitz was immigrating to America and needed to transfer US $1,053,143.00 from proceeds of share disinvestment to set up a business as a condition of his immigration status. The funds were held in a trust account by CWG (a law firm) at Standard Chartered Bank. The money originated from outside funds deposited into the Bank's Nostro account. The Reserve Bank of Zimbabwe (RBZ) approved remittance on 11 August 2016. On 26 August 2016, CWG requested the transfer, but Standard Chartered Bank advised they needed RBZ allocation of funds to effect the transfer. Reitz argued the funds should be available on demand as "free funds" and that his constitutional rights to movement and property were being violated. Standard Chartered classified the transaction as disposal of commercial property (non-priority category under RBZ guidelines ECOGAD D8/16), while Reitz claimed it should be classified as emigration-based disinvestment (priority one category).

• Whether the application was urgent
• Whether the application was premature given that RBZ had been approached
• Whether there was material non-joinder of the RBZ as a necessary party
• Whether the relief sought was contrary to law given RBZ guidelines on priority categories for foreign payments
• Whether the applicant had locus standi to bring the application against Standard Chartered Bank in the absence of a direct customer/client contractual relationship
• Whether Standard Chartered Bank was violating the applicant's constitutional rights to freedom of movement and property

The application was dismissed with costs.

The binding legal principles established are: (1) A third-party beneficiary of funds held in a trust account at a bank lacks locus standi to bring a direct claim against the bank in the absence of a direct contractual customer/bank relationship - the remedy lies with the account holder (the law firm holding the funds in trust); (2) Where a bank operates within Reserve Bank of Zimbabwe guidelines on foreign currency allocation and priority categories, it cannot be held liable for delays in transfers that result from awaiting central bank allocation of funds; (3) A party seeking to challenge the constitutionality of Reserve Bank regulatory instruments (such as exchange control guidelines) must bring such challenge in separate proceedings with the RBZ as a necessary party; (4) Material non-joinder of an essential party (in this case the RBZ, which has the capacity to allocate funds) renders an application fatally defective and cannot be saved by Rule 87 of the High Court Rules.

The court made several non-binding observations: (1) That in assessing urgency, it is necessary to look at the totality of circumstances and time-bound nature of applications, and applicants should not be automatically penalized for allowing some time for processes to unfold before approaching court; (2) That while the constitutional right to freedom of movement under section 66 of the Constitution includes the right to leave Zimbabwe and is possessed by all citizens and those legally in Zimbabwe, this right is not being fettered by a bank's compliance with exchange control regulations; (3) That policy guidelines are not laws of general application as envisaged by the Constitution; (4) The court acknowledged that there is "somewhat a substantial relationship" arising from the nature of transactions where funds are held in trust for third parties, even though this does not change the fundamental contractual relationship between bank and direct customer.

This case is significant in Zimbabwean banking and constitutional law for several reasons: (1) It clarifies the limits of constitutional rights (freedom of movement) in the context of exchange control regulations and foreign currency shortages; (2) It affirms that banks operating within Reserve Bank guidelines cannot be held liable for delays in foreign currency transfers when those delays result from the central bank's allocation processes; (3) It establishes that challenges to the constitutionality of Reserve Bank regulatory instruments must be brought in separate proceedings with the RBZ as a party; (4) It reinforces the principle that the bank-customer contractual relationship is determinative of locus standi, and third-party beneficiaries of trust accounts cannot bring direct claims against banks; (5) It demonstrates the court's approach to exchange control compliance during periods of foreign currency shortage in Zimbabwe.