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Legal opinion on ENG vs Interfin ‘looting’ saga

We have been reporting extensively on exiled businessman Gilbert Muponda and his fight to get his bank Century Bank which was rebranded to CFX Bank and later absorbed into Interfin Bank. 


Sternford Moyo

In this piece lawyer Sternford Moyo offers his legal opinion. Moyo has in the past represented Meikles supremo John Moxon and its pertinent to state that Interfin CEO Farai Rwodzi is also Meikles Africa Chairman.


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1      Interfin recently merged with CFX Banking Corporation Limited.  Prior to this merger, another merger had taken place between Century Banking Corporation Limited and CFX Merchant Bank to form CFX Financial Services Limited, 100% owner of CFX Bank Limited.   

2      As substantial amount of the shares in Century Banking Corporation Limited appear to have been owned by ENG Capital Investments (Private) Limited or ENG Asset Management Company (Private) Limited.  The two companies owned several subsidiaries and the entire group appears to have been controlled by Gilbert Muponda and Nyasha Watyoka.

3      The issue that has been raised is that the ENG shares in Century Banking Corporation Limited were unlawfully transferred to third parties who purport to have purchased same and as a consequence of such transfers, the merger between Century Banking Corporation and CFX Merchant Bank was facilitated.  It appears to be alleged, consequently, that Century Banking Corporation Limited fell into the control of persons who were not entitled to control it.  Using such control, such persons are alleged to have merged Century Banking Corporation Limited with CFX Merchant Bank.  Mr Muponda, as a shareholder in ENG, the owner of the shares alleged to have been unlawfully transferred has raised various complaints alleging illegal “grabbing” of his asset namely Century Banking Corporation Limited.

4      ENG Asset Management was, in 2002, indebted to a company called First Mutual Asset Management Company (Private) Limited among other creditors arising from various deposits that were paid to ENG Asset Management Company (Private) Limited for investments with repayment of the capital amounts and agreed earnings thereon to be paid upon maturity.  Upon maturity of the deposits, ENG Asset Management Company issued cheques which were, upon presentation, dishonoured by its bank.

5      At the time ENG Asset Management (Private) Limited and ENG Capital Investments (Private) Limited had acquired substantial assets in the form of immovable properties, motor vehicles, shares in listed and unlisted companies among other assets.  Clearly, taking into account the hyperinflationary environment prevailing at the time, ENG’s strategy of investing in properties was understandable.  There were very few hedging instruments to protect the deposits they had collected from the negative effects of inflation.  However, their investment strategy appears to have led to liquidity difficulties or liquidity mismatches which resulted in their inability to discharge liabilities as they became due.

6      Under Zimbabwean law, creditors who are unable to obtain payment from debtors in discharge of liabilities as they become due are entitled to resort to sequestration or liquidation proceedings.  First Mutual Asset Management Company filed an application in the High Court on the 9th January 2004 for the liquidation of ENG Asset Management Company Limited.  The court papers were subsequently amended to include, in the liquidation application, ENG Capital Investments (Private) Limited.  The application was filed as an urgent application and on the 12th January 2004, a provisional order of liquidation was issued against ENG Capital Investments (Private) Limited and ENG Asset Management (Private) Limited.  The order was subsequently confirmed by the High Court under case number 244 of 2004 on the 13th February 2004.  Mr Justice Hungwe issued the confirmation order.  There does not appear to have been any opposition to both the provisional order of liquidation and its confirmation.   

7      The liquidation proceedings were not at any time challenged.  No attempt appears to have been made to obtain an order setting aside the proceedings.  Indeed, to date, no proceedings have been instituted to set aside the liquidation proceedings.  The companies were duly wound up in terms of the procedure provided for in the Companies Act and a distribution to creditors was duly effected.  There was no objection to the distribution. 

8      In terms of Sections 218 and 221 of the Companies Act [Chapter 24:03], the liquidator had the power, with the leave of the court or with the authority of the Master of the High Court to, among other things: “sell, by public auction or otherwise, deliver or transfer the movable and immovable property of the company.”  Accordingly, the sale of shares by the liquidator with the approval of the High Court or that of the Master of the High Court is anchored on authority granted to the liquidator in terms of the Companies Act.  This feature distinguishes the sale of the ENG assets from the sale of assets belonging to Royal Bank, Trust Bank and Barbican Bank.  The assets of the three banks were sold by the curators of such banks.  The Supreme Court found that unlike a liquidator, the curators had no power or authority to dispose of the assets.  It is on that basis that the disposal of the assets was found to be unlawful, null, void and of no force and effect.  In the instant case, the sale. 

9      Prima facie, therefore, any disposal by the liquidator which is confirmed by the High Court or the Master of the High Court is a lawful disposal.  A party alleging that the liquidation procedures were influenced by an unlawful act or unlawful activities has to make the claim formally in court and establish the basis for any allegation he or she may make.  It has been suggested in another opinion on the matter that Section 10 of the Prevention of Corruption Act [Chapter 9:16] divests Muponda of any locus standi.  This is not correct.  The issue was addressed by the Supreme Court in the case of MUTUMWA DZIVA MAWERE v THE MINISTER OFJUSTICE, LEGAL AND PARLIAMENTARY AFFAIRS,  S.C. NO. 158 OF 2005.  In that matter, an objection to locus standi was raised on the basis that Mutumwa Mawere was a specified person and could not, therefore, institute legal proceedings to challenge his specification or at all without the authority of the investigator.  It was common cause that the prohibition was not absolute and could be cured by the authority of the investigator.  Likewise, the obstacle faced by the directors of ENG can be cured by the authority of the investigator. 

An additional issue raised by the Supreme Court was that: “The Applicant is a specified person in Zimbabwe not in the Republic of South Africa.  The restrictions can only apply to his assets in Zimbabwe and not in the Republic of South Africa.  The above restrictions can only apply to his assets in Zimbabwe and not in the Republic of South Africa.  It has not been shown that in instituting this appeal while he is in the Republic of South Africa he is expending on any of his assets which are in Zimbabwe.  Any assets which he may have in South Africa are not affected by the above provision.  The investigator has no jurisdiction over the Applicant’s assets which are not in Zimbabwe.  Accordingly, this Court cannot hold that he has no locus standi to launch the appeal in this Court in the absence of evidence suggesting that he is expending or disposing of assets in Zimbabwe.” 

Consequently, Mr Muponda or Mr Watyoka, wherever they may be, can institute legal proceedings notwithstanding the specification.  Decisions to the High Court to the contrary made before 11th September 2008 when the Supreme Court made its above finding are applicable only where the specified person proposes to use the resources of his estate in Zimbabwe.  An additional basis raised by the Supreme Court is given on page 6 of the judgment where the Supreme Court pointed out that: “In addition, it is a moot issue whether he can be deprived of his constitutional right to challenge an administrative decision such as the above in a court of law to test its correctness.  For example if such authority was refused by the investigator the appellant would have a right to appeal if it was unreasonably refused.

10   The only issue that would prevent Muponda from accessing Zimbabwean courts is the allegation that because he left Zimbabwe in breach of his bail conditions and deliberately put himself beyond the reach of the law, he is a fugitive from justice.  That ground would not apply to other directors of the ENG group of companies.  Furthermore, it would not prevent creditors of ENG from taking legal action to redress diminution of the estate of ENG arising from any improper disposal. 

However, creditors will have probably lost interest because there is evidence to suggest that they were all paid in full.  No explanation, however, exists as to why other directors or shareholders in ENG group of companies did not take action if there was evidence of the alienations of property made by the liquidator having been made unlawfully.  The absence of legal action appears to suggest that there is no foundation for allegations to the effect that the assets were not disposed of lawfully.  There appears to have been no objection to the final account by the liquidator or the proposal for distribution.

11   Another ground that has been given for ENG and its directors not taking legal action was prescription.  The general rule is that causes of action in Zimbabwe prescribe and are extinguished by the operation of prescription in terms of Sections 14 and 15 of the Prescription Act [Chapter 8:11].  There is however delay of prescription under Section 6 of the Prescription Act where the person affected by prescription is under curatorship or prevented by superior force or any enactment or order of court from interrupting the running of prescription. 

Before 11th September 2008, the directors or ENG will have been incapacitated by Section 10 of the Prevention of Corruption Act as read with judgments from the High Court to the effect that a specified person could not institute proceedings without the approval of the investigator.  There is, however, no evidence that they sought such approval.  Section 6 provides that: 

“(1)  If—

(a)  the person against whom the prescription is running is a minor or is insane or is a woman whose separate property is controlled by her husband by virtue of his marital power or is a person under curatorship or is a person whose behaviour or physical or mental condition justifies his being placed under curatorship or who is prevented by superior force or any enactment or order of court from interrupting the running of prescription in terms of section seven ; or

(b)  the person in favour of whom the prescription is running is outside Zimbabwe or is married to the person against whom the prescription is running or is a member of the governing body of a juristic person against whom the prescription is running; or

(c)  the person against whom or in favour of whom the prescription is running is deceased and an executor of the estate in question has not yet been appointed;

and the period of prescription would, but for this subsection, be completed before or on, or within three years after, the date on which the relevant impediment referred to in paragraph (a), (b) or (c) has ceased to exist, the period of prescription shall not be completed before the expiration of the period of three years which follows that date.

(2)  Subject to subsection (1), the period of prescription in relation to fideicommissary property shall not be completed against a fideicommissary before the expiration of the period of three years which follows the date on which the right of that fideicommissary to that property vested in him.” 

12   The incarceration of the directors, the liquidation of their company and consequent divesting of their powers as directors and interpretation by the High Court of Section 10 of Prevention of Corruption Act are “superior force or any enactment or order of court” which will have prevented the specified directors from taking action to interrupt the running of prescription in terms of Section 7 that is to say by instituting judicial proceedings.  This will have been the case until the Supreme Court made its ruling on the 11th September 2008.  After that, there was no disability.

13   Indeed, in December 2009, one of the directors of ENG namely Nyasha Watyoka appears to have instituted legal proceedings under High Court Case Number 6086 of 2009 against the liquidator, the Officer Commanding Zimbabwe Republic Police, the Commissioner General of Zimbabwe Republic Police and the Master of the High Court, in which he alleged, in his affidavit, inter alia that:

“13.1 I am a former Director of ENG Capital Investments (Pvt) Ltd, E.N.G. Capital Partners (Pvt) Ltd and E.N.G. Asset Management (Pvt) Limited.

13.2     These companies were placed in voluntary liquidation in 2004 and the 1st Respondent was the appointed liquidator.

13.3     Preliminary to the liquidation process, I together with my co-director Gilbert Muponda, were arrested by the 2nd Respondent and charged with fraud.

13.4     During the period of our arrest and subsequent incarceration in remand prison the 2nd Respondent, acting through his subordinates caused the seizure of several motor vehicles belonging to E.N.G. in liquidation and several other cars belonging to myself and some I presume to my co-director and family members.

13.5     Among the vehicles so seized and detained at the Chikurubi Police Camp were the following motor vehicles belonging to and owned by myself;

Make                                     Registration No.

(a)         Mitsubishi RVR                       792-035 G

(b)         Mercedes Benz C320               793-669H

(c)          Mercedes Benz C180               778-980R

(d)         BMW Z3                                  740-372B

13.6     I must add that at the time the vehicles were seized in 2003 I had not had the opportunity to change the registration particulars in my favour.  Thus as reflected on the Registration books attached hereto as “A1” to “A4”, the vehicles are still registered in the names of the third parties from whom I purchased them.

13.7     The 1st Respondent with the supervision of the 4th Respondent successfully undertook and completed the liquidation of E.N.G. group of companies.  In particular, the assets seized from E.N.G. companies and Directors satisfactorily liquidated all debts part, present and future accumulated by the company.

13.8     The final liquidation and distribution account was approved by the 4th Respondent after it had lay for inspection from the 31st October 2008 without any objections.  I attach herewith as “B” the Notice in terms of Section 281 of the Companies Act published in the Government Gazette.

13.9     The 1st Respondent has completed the aforesaid liquidation and as part of his fiduciary duties he has returned to the directors of E.N.G. Capital Investments, a company known Allied Conveyors (Pvt) Ltd.  Its assets are no longer required to pay the creditors.

13.10  The 1st Respondent on the other hand never sought to dispose of or deal with the aforesaid motor vehicles before, during or after the liquidation process.  I presume again that the realization was not necessary.

13.11  The vehicles still remain detained at Chikurubi Police Camp and I must state that they are in a state of continual degeneration and depreciation which I am advised is not the object of liquidation and seizure of assets.

13.12  The 1st Respondent referred me to the 2nd Respondent to make representation for the release of motor vehicles.

13.13  I have not had any positive response from the 2nd Respondent to my letter attached as “C”, thus I now approach this Honourable Court seeking relief in terms of the draft.”

14     It will be noted that in that affidavit, that Mr Watyoka:

14.1      points out that the companies were placed into “voluntary liquidation.”  There can be no question, therefore, of there having been no grounds for liquidation;

14.2      points out that the liquidator, with the supervision of the Master successfully undertook and completed the liquidation of ENG group of companies.  He states that the assets satisfactorily liquidated all the debts;

14.3      he confirms that the final liquidation and distribution account was approved without any objections and that assets in excess of the liquidation requirements were duly returned by the liquidator to the directors of ENG Capital Investments;

14.4      There is nowhere in his affidavit where he refers to any improper disposition of the assets of the liquidated companies.                      

15       Any proceedings would be against the liquidator and would not affect any innocent third parties who purchased the shares let alone the shareholders of Interfin who came into the picture eight years later.

16       Reference has been made to shares having been acquired by influential politicians.  In one of the articles posted on the internet, reference was made of the shares having been acquired by Network Investments (Private) Limited and Kwangwari Enterprises (Private) Limited.  Our search at the Companies Office revealed that there is no evidence of registration of a company known as Kwangwari Enterprises (Private) Limited. 

However, Network Investments (Private) Limited is registered as company number 3717 of 1990 incorporated on the 24th October 1990.  Its registered office is Ernst & Young Consultants (Private) Limited, Level 4 Angwa City, Julius Nyerere Way/Kwame Nkrumah Avenue.  Its directors are given as Rachel Pfungwa Kupara and Fatima Khalil Khan.  The two are professional people who are well known in business circles in Zimbabwe.  Their political involvement, if it exists, is unknown.  We have no hesitation in pointing out that designation of them as influential political actors is manifestly incorrect.

17       In all the circumstances, until such time as the disposal by the liquidator which was judicially confirmed in sense that it will have been confirmed by the High Court or by the Master of the High Court is set aside, no basis in law exists for alleging that the acquisition of the assets sold by the liquidator was unlawful.  Even further from such allegation would be the acquisition by third parties coming several years after the disposal by the liquidator.

18       In all circumstances, there appears to be no justification or substance in the allegations made against Interfin Merchant Bank, Farai Rwodzi or other directors of Interfin Merchant Bank.

19       We advise accordingly. 

Yours faithfully 

Sternford Moyo, B.L. (Hons) LL.B (Distinction), Senior Partner, Scanlen & Holderness Solicitors since 1894.

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