Xianbo Investments (Pvt) Ltd v Metbank Limited and Ecobank Zimbabwe Limited

Metbank Limited (first respondent) obtained a default judgment against Xianbo Investments (applicant) for US$56,640.00 on 14 September 2018. The amount was erroneously debited from the applicant's non-funded account with Metbank and transferred to the applicant's account with Ecobank (second respondent). The applicant only became aware of the judgment on 20 February 2019 when telephonically advised by Metbank. The applicant sought rescission of the default judgment, claiming that summons was served on Mr David Mutizamhepo, a former director whose directorship ceased on 10 June 2017 according to a CR 14 filed on 12 October 2017. However, Metbank produced a letter dated 6 March 2018 signed by both Mutizamhepo and Mr Cheng Mengxu as directors, informing Metbank of a change in signing arrangements due to Mr Ru Hongxing's relocation to China. The applicant had never notified Metbank of any change in directorship.

• Whether the applicant established good and sufficient cause for rescission of the default judgment under Order 9, Rule 63 of the High Court Rules 1971
• Whether service of summons on Mr Mutizamhepo was valid service on the company
• Whether the applicant had a reasonable explanation for its default in entering appearance to defend
• Whether the applicant had a bona fide defence on the merits with prospects of success
• Whether Metbank was entitled to rely on representations made by persons appearing in the company's CR 14 as directors under sections 11 and 12 of the Companies Act

The application for rescission of judgment was dismissed. The applicant was ordered to pay the first respondent's costs.

For purposes of Rule 63 of the High Court Rules 1971, an applicant seeking rescission of a default judgment must establish: (i) a reasonable explanation for the default; (ii) bona fides in the application to rescind; and (iii) a bona fide defence on the merits with prospects of success. Under sections 11 and 12 of the Companies Act [Chapter 24:03], third parties dealing with a company are entitled to assume that persons described in the company's register of directors or in returns delivered to the Registrar are duly appointed directors with authority to act, and the company is estopped from denying this unless the third party was properly notified of changes. Service of process on a person appearing in official company documents as a director constitutes valid service under Rule 39(2)(d) of the High Court Rules, even if that person has allegedly resigned, where the company failed to notify the serving party of the change. A customer who receives funds erroneously transferred into its account is liable to repay the bank on the principle of unjust enrichment.

The court noted that the first respondent raised a preliminary objection concerning the propriety of Mr Ru Hongxing to depose to the applicant's founding affidavit, but this objection was abandoned at the hearing and the court did not concern itself with its merits. The court observed that there was no suggestion that any money went into the accounts of either Mr Mutizamhepo or Mr Mengxu personally, implying that fraud or personal benefit was not alleged. The court commented that the applicant's failure to address material allegations in the opposing affidavit was significant, applying the principle from Fawcett Security Operations that undenied allegations in affidavits are taken to be admitted.

This case is significant for clarifying the application of sections 11 and 12 of the Companies Act [Chapter 24:03] in the context of service of process and dealings with companies. It reinforces that third parties, including banks and litigants, are entitled to rely on information in the company's register of directors and representations made by persons appearing in official company documents (such as CR 14 forms) unless properly notified otherwise. The case emphasizes that a company cannot escape liability by claiming internal changes in directorship when it failed to notify the relevant third party of such changes. The judgment also reaffirms the strict requirements for rescission of default judgments under Rule 63, particularly the need to establish a reasonable explanation for default and a bona fide defence with prospects of success. It confirms the principle from Zimbabwe Banking Corporation Ltd v Chibune that customers who receive erroneously transferred funds must repay banks on the basis of unjust enrichment.