Reserve Bank of Zimbabwe v (1) Wesley Simba Sibanda (2) The Master of the High Court

On 24 March 2004, First National Building Society (FNBS) was placed under provisional liquidation with Mr David John Scott appointed as provisional liquidator. On 25 January 2006, Scott was appointed as final liquidator at a creditors' meeting. On 13 September 2006, at a further meeting of creditors and contributories, Scott was dismissed and the first respondent (Sibanda) was appointed as final liquidator of FNBS. Some creditors appealed this decision to a Judge in Chambers under s 219 of the Companies Act. On 24 October 2006, the Reserve Bank of Zimbabwe (the appellant) wrote to the Master pointing out that the appointment of the first respondent was irregular as it contravened s 57(1)(b) of the Banking Act, which requires that only persons recommended by the Reserve Bank may be appointed as liquidator of a banking institution. FNBS was a banking institution by virtue of General Notice 101 of 2005. The Master nevertheless allowed the first respondent to continue acting as liquidator. On 25 October 2006, FNBS's registration as a building society was cancelled. The appellant filed an urgent application to the High Court on 3 November 2006 seeking to declare the appointment null and void. The High Court dismissed the application, finding it was not urgent, the appointment was not unlawful, and the appellant acted in bad faith.

• Whether the appointment of a liquidator of a banking institution without the recommendation of the Reserve Bank of Zimbabwe contravenes section 57(1)(b) of the Banking Act
• Whether the cancellation of FNBS's licence after the appointment of the liquidator retrospectively validated the unlawful appointment
• Whether the provisions of section 57(1)(b) of the Banking Act are peremptory and override the provisions of the Companies Act and Insolvency Act
• Whether the appellant had an alternative remedy by joining the pending appeal and whether the matter was sub judice
• What is the appropriate remedy for an unlawful appointment of a liquidator

The appeal was allowed with costs to be costs of liquidation. It was declared that the appointment of the first respondent as liquidator of FNBS was unlawful and therefore null and void.

Section 57(1)(b) of the Banking Act contains a peremptory provision that no person other than a person recommended by the Reserve Bank shall be appointed as liquidator of a banking institution. This provision applies notwithstanding anything to the contrary in the Insolvency Act or the Companies Act. An appointment made in contravention of this provision is void ab initio. The Master's power to appoint a liquidator of a banking institution is limited by the requirement of recommendation by the Reserve Bank - he may only appoint from among those persons recommended by the Reserve Bank. The subsequent cancellation of a banking institution's licence does not retrospectively validate an appointment that was unlawful at the time it was made. The lawfulness of an appointment must be determined as at the date of the appointment, not by reference to subsequent events.

The court noted that the Banking Act does not provide an avenue for appeal by the Reserve Bank in circumstances such as these, which justified the appellant's approach to the High Court for redress. The court also observed (without making a determination) that emotional and moral arguments about the merits of competing liquidators, while possibly having merit, cannot override clear peremptory statutory provisions. The court commented on the High Court's observation about the Reserve Bank wearing "three hats" (umpire, regulator and creditor), noting that this was irrelevant to the application of the clear statutory provisions.

This case establishes important principles regarding the regulatory powers of the Reserve Bank of Zimbabwe over banking institutions in liquidation. It affirms the supremacy of specific banking legislation over general company and insolvency law provisions when dealing with banking institutions. The case demonstrates the importance of strict compliance with peremptory statutory provisions in administrative appointments, particularly in the regulated financial services sector. It establishes that procedural irregularities in the appointment of liquidators of banking institutions cannot be cured by subsequent events or overlooked based on the perceived merits of the appointee. The judgment reinforces the principle that where legislation uses clear, mandatory language (such as "no person other than"), courts must give effect to that language regardless of other considerations or the multiple roles an entity may play.