National Merchant Bank Limited v The Cold Chain (Private) Limited

The defendant, an importer, instructed the plaintiff bank (an authorized dealer in foreign currency) to pay ZAR 372,062.80 to its South African supplier, Kimberley Clark, on 21 March 2001. The plaintiff effected payment via telegraphic transfer on 4 April 2001. On 11 May 2001, believing the transfer had not gone through, the plaintiff duplicated the payment via bank draft on the defendant's advice. The supplier received both payments and supplied further goods to the defendant using the duplicated funds. When the error was discovered, the defendant acknowledged liability and offered to repay in Zimbabwe dollars at the official exchange rate. On 6 August 2001, the defendant tendered a cheque for ZWD 2,664,341.71 (later corrected to ZWD 2,770,331.41), representing the duplicated amount converted at the official rate plus interest. The plaintiff rejected this tender, initially demanding payment based on the parallel (illegal) market exchange rate (ZWD 8,185,381.60), and later demanding repayment in Rands (ZAR 372,062.80). The parties had an established course of dealing whereby the plaintiff sourced foreign currency and the defendant paid in Zimbabwe dollars.

• Whether the defendant was obliged to return the overpayment in Rands (foreign currency)
• What was the applicable exchange rate to determine the Zimbabwe Dollar equivalent - official rate or parallel market rate
• Whether a tender in local currency constituted sufficient discharge of an obligation arising from a foreign currency transaction
• Whether a court could grant judgment in foreign currency in circumstances where the loss was felt in local currency
• What date should apply for currency conversion purposes

1. Judgment entered for the plaintiff in the sum of ZWD 2,770,331.41 2. The defendant shall pay the plaintiff's costs up to 6 August 2001

Where parties have an established course of dealing in a particular currency (local currency), an obligation arising from unjust enrichment in the context of foreign currency transactions must be discharged in the currency in which the loss is felt, which is determined by the parties' normal currency of business operations. A tender made in local currency at the official exchange rate, where such payment accords with the established practice between the parties, constitutes valid and sufficient discharge of the obligation. Courts will only grant judgments in foreign currency where evidence or agreement establishes that the loss was felt in foreign currency. Courts will apply only official exchange rates recognized by law and will not endorse or enforce conversions based on illegal parallel market rates. The date for currency conversion is the date of proper tender or consent to judgment, not the date of final judgment or enforcement.

The court observed that while use of the parallel market rate might make economic sense in an inflationary environment, such a route remains illegal and cannot be endorsed by the court. The court noted that options for recovering a foreign debt may be left to the judgment creditor's discretion, but such options should be spelled out at the time of making the transaction and must comply with foreign exchange regulations. The court commented that the plaintiff was to blame for the loss it suffered as a result of inflation, as this loss would have been avoided had it accepted the proper and lawful tender made on 6 August 2001. The court acknowledged that due to inflation, the amount tendered had become de minimus, but held this was a consequence of the plaintiff's own improper rejection of the tender.

This case establishes important principles in Zimbabwean law regarding unjust enrichment claims arising from banking errors involving foreign currency transactions. It clarifies that courts will determine the appropriate currency for judgment based on where the loss is actually felt, considering the established course of dealing between parties, rather than simply the currency in which the error occurred. The case reinforces that courts will only recognize official exchange rates and will not enforce arrangements based on illegal parallel market rates, even if economically advantageous. It also establishes that where a proper tender is made at the official rate, rejection of such tender based on desire to use illegal rates will be to the creditor's detriment. The judgment provides guidance on when foreign currency judgments are appropriate and emphasizes the importance of complying with foreign exchange regulations.