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Jayesh Shah saved by prescription in US$1 million case

Controversial businessman, Jayesh Shah, has escaped theft charges arising from a transaction with the Reserve Bank of Zimbabwe (RBZ) during the Leonard Tsumba-era when he and his company allegedly ripped a local bank of nearly US$1 million.

Reserve Bank of Zimbabwe building in the background

This follows the partial success of Shah’s appeal in a Supreme Court case in which Kingdom Merchant Bank (KMB), a subsidiary of the now defunct Kingdom Financial Holdings Limited (later AfrAsia Bank Zimbabwe), sought to bring theft charges against Shah after the tycoon and his company were over-paid by US$900 000 in a 2002 loan deal that involved the central bank.

Court documents indicate that in April 2002, the parties entered a contract in which Shah, through his company Saturn Trading and Investments, advanced US$4 million to the then Nigel Chanakira-owned KMB for onward lending to the RBZ via Renaissance Merchant Bank.

According to the terms of the contract, Shah would receive repayments from (KMB) or directly from Renaissance and would refund any overpayments to KMB.

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The RBZ was unable to make timely repayments for the loan to Renaissance, which resulted in KMB being unable to pay Saturn, leading to a dispute in which Shah’s firm threatened to recall the loan.

Shah and his firm pressurised both KMB and Renaissance for payment, resulting in him being overpaid by US$900 000.

Efforts by KMB to recover the money that had been over-paid yielded no results, forcing the bank to sue Shah and his investment firm in 2006.

In the case, KMB demanded the US$900 000 repayment with interest at the rate of treasury bills of the Federal Bank of the United States calculated from October 1, 2002 to the date of payment.

Sometime towards the end of 2007, KMB lawyers sought to amend their court application to include theft charges against Shah. The bank’s lawyers applied to the High Court judge who was hearing the case for permission to amend their declaration. This application was granted in 2013.

Shah appealed against this decision to the Supreme Court, arguing that the judge had not just erred in granting the application, but also that the alleged theft charges had prescribed because more than four years had lapsed since the alleged offences had been committed.

Justice Elizabeth Gwaunza, sitting with Justices Anne-Mary Gowora and Susan Mavangira as the Supreme Court, ruled that the charge should have been made in the initial declaration because court rules do not allow for the introduction of new causes of action in the middle of a trial.

“I am satisfied that these two claims did not constitute new causes of action. Thus, the question of prescription in so far as the fraudulent misrepresentation and unjust enrichment of the appellant were concerned, did not arise. The claims were neither new causes of action, nor were they prescribed. I am satisfied that the learned judge correctly applied Rule 132 of Order 20 of the High Court Rules, cited above and that in doing so, he did not make any error in exercising the discretion imposed on him,” Justice Gwaunza said in a judgment made available over a fortnight ago.

She said since the theft charge was raised out of time, it had prescribed.

“On the basis of the law and authorities on prescription, it was clearly not open to the respondent in casu to seek an amendment to its declaration, whose effect would have been to introduce a prescribed cause of action that is theft. It follows that the judge a quo misdirected himself in disregarding this relevant fact and ordering the amendment in question.

This court can therefore properly interfere with the judge’s discretion in this respect. In the final result, the appeal ought to succeed only to that extent, while the rest of the appeal, having no merit, ought to be dismissed.” Financial Gazette