Israel-based software firm loses US$2m suit
AN Israel-registered software company failed in the High Court to force Nedbank to settle its US$2 million debt in foreign currency for services rendered to TelOne.
The company also sought an order declaring their account with Nedbank an escrow account to allow for the payment to be made in foreign currency.
Magic Software Enterprises was contracted to provide an upgrade to local telecommunications entity TelOne’s Leap Billing Services. But Nedbank Zimbabwe insisted that the US$1,996 723,02 cumulatively paid by TelOne into the Magic Software Account was converted to Zimbabwe dollars by law and there was no special arrangement made for a different type of account.
In its suit, Magic Software sought a declaratory order that US$1,996 723,02 which was deposited with the Nedbank constituted a foreign loan, and so a foreign obligation.
It also sought a declaration that the conversion of its funds from US dollars to Zimbabwe dollars was unlawful and breached section 44C (2)(b) of the Reserve Bank of Zimbabwe Act. Finally the Magic Software wanted an explicit order compelling Nedbank to settle the debt as US$1,996 723,02.
Magic Software, after signing a contract with TelOne, approached Nedbank in 2017, to open an account into which TelOne would make payments due to the company in terms of the contract.
The company, represented by Advocate Thembinkosi Magwaliba, argued that Nedbank officials specifically advised and confirmed that they would avail a “non-resident escrow account”.
But it emerged during the hearing that none of two emails cited in the case referred directly and unequivocally to a “non-resident escrow account”.
But Magic Software opened the account on the understanding that it was indeed a non-resident escrow foreign currency account.
However, through its legal counsel Adv Thabani Mpofu, Nedbank argued that the account was irregularly opened for want of prior approval by the Reserve Bank of Zimbabwe’s Exchange Control Department.
It was Magic Software’s responsibility to secure such authorisation, argued Adv Mpofu, but Adv Magwaliba counter-argued that Nedbank had failed to render correct advice on the requirements behind the opening of the escrow foreign currency account.
In that regard, Magic Software pleaded with the court not to allow Nedbank to escape from obligation nor benefit from dereliction.
After hearing the submissions from both parties’ legal counsel, Justice Joseph Chilimbe dismissed the civil action brought by Magic Software for want of proof on a preponderance of probabilities.
In his reasoning, Justice Chilimbe noted that full recovery of funds secured offshore in foreign currency can only be in foreign currency and not local currency. But the present claim was against Nedbank and was predicated on the money reposed in a bank on the basis of arrangements between the parties.
However, the court was not presented with sufficient factual circumstances and material substance to enable the ascertainment of the nature of the transaction between the parties.
“There is nothing to offset the conclusion that the debt herein is not at all denominated in foreign currency,” said Justice Chilimbe in his ruling. “It was, therefore, imperative coming to the escrow account under focus, for the terms between Nedbank and Magic Software to be explicitly set out before the court.
“The paucity characterising the two emails filed on record rendered them too shaky a pair of legs to convey the full terms and conditions of the contract.” In that respect, the court was handicapped in the dual task of conducting the wider considerations triggered by a declaratory claim and the similarly wider sweep necessitated by Section 44C (2) (b).
“On that basis, no case has been properly established to warrant the discretionary intervention of the court and assert the rights claimed by Magic Software,” ruled Justice Chilimbe.
“The relief sought is unreachable, and will thus be refused with costs.”
In his submission Adv Mpofu told the court that although the claim was based on a contract, the terms were not placed before the court, to make a decision. On that basis, Justice Chilimbe found it impossible to ascertain the parties’ rights and obligations, especially given the claim and its contestation.
“The banker-client mandate and duty buttressing the claim was not established beyond the common cause, as the court did not know what exactly were the banking arrangements agreed upon in setting up the escrow account,” he said.