The respondent, China Shougang International, a foreign investor operating in Zimbabwe, held two accounts with the Kwekwe branch of the appellant bank (Standard Chartered Bank Zimbabwe Limited). As at 9 October 2007, the accounts had an aggregate credit balance of US$47,739.86. In October 2007, pursuant to a directive issued by the Reserve Bank of Zimbabwe (RBZ) purportedly in terms of s 35(1) of the Exchange Control Regulations 1996 SI 109 of 1996, the appellant transferred the total credit balance to the RBZ. When the respondent demanded payment of the monies, the bank refused, claiming that the RBZ's intervention rendered it impossible to comply with its contractual obligation. The respondent applied to the High Court for an order compelling payment, alleging the monies were wrongfully debited without consent. The High Court granted the application, and the bank appealed to the Supreme Court.
The appeal was dismissed with costs. The bank was required to pay the respondent the sum of US$47,739.86 plus costs.
The binding legal principles established are: (1) Moneys deposited into a bank account become the property of the bank, which has a contractual obligation as debtor to pay the customer-creditor on demand the equivalent of the amount deposited. (2) A bank's transfer of deposited funds to a third party (including a regulatory authority) does not extinguish its contractual obligation to repay the depositor on demand. (3) For the defence of supervening impossibility to succeed, the impossibility must be proved - it must be clear that performance is impossible, not merely undesirable or uneconomical. (4) Obedience to a ministerial directive given without statutory authority does not constitute vis maior or casus fortuitus and does not discharge contractual obligations. (5) Self-created impossibility, resulting from the act of one of the parties, does not discharge the contract but leaves that party liable for the consequences. (6) An ultra vires directive by a regulatory authority cannot form the basis of a valid defence of supervening impossibility.
The court made observations regarding: (1) The bank's claim that it feared the RBZ which had power under s 37 of the Regulations to revoke its licence - the court noted that the Regulations provided adequate safeguards, including that the RBZ must give the dealer an adequate opportunity to make representations before taking punitive measures. (2) The distinction between vis maior and casus fortuitus is unnecessary for the purposes of the law of supervening impossibility, as they together include any happening, whether due to natural causes or human agency, that is unforeseeable with reasonable foresight and unavoidable with reasonable care. (3) The court cited with approval RH Christie's statement in The Law of Contract in South Africa regarding the limits of vis maior and casus fortuitus, particularly that legislation subsequent to contract-making that makes performance illegal qualifies, but not obedience to ministerial directives without statutory authority.
This case is significant in Zimbabwean and broader banking law as it: (1) Reaffirms the fundamental principle of banking law that the relationship between a bank and depositor is one of debtor-creditor, not bailment; (2) Establishes that a bank cannot escape its contractual obligation to repay deposits on demand merely because it has transferred funds pursuant to an administrative directive; (3) Clarifies that obedience to an ultra vires ministerial directive does not constitute supervening impossibility or vis maior; (4) Reinforces the protection of depositors' rights against unlawful administrative action; (5) Demonstrates that banks bear the risk of their dealings with deposited funds and cannot pass that risk to customers; (6) Provides important guidance on the limits of the defence of supervening impossibility in contract law, particularly in the banking context. The judgment protects the integrity of the banking system and depositor confidence by holding banks strictly accountable for their contractual obligations regardless of external pressures.