CDH, Zimbank suit hearing set for March

Shakeman Mugari



THE case in which Century Discount House (CDH) is suing Zimbank for allegedly liquidating $4 billion worth of its GMB Bills before maturity is set for

hearing early next month.


CDH is seeking compensation for what it alleges was the illegal sale of its bills.


It is demanding to be paid the principal value of the bond plus interest at the CDH rate. Zimbank has already filed opposing papers.


But it is the details of the transaction and Zimbank’s explanations that are likely to take centre-stage when the case opens.


Correspondence between the two parties indicate that Zimbank could have botched the transaction, which could cost them more than $5 billion if they lose the case.


Papers to hand show that Zimbank had a difficult time trying to explain the pre-maturity sale of the GMB Bills.


It took the bank weeks to respond to CDH curator Cecil Madondo’s query over the issue.


Zimbank later requested for more time to clarify the issue in a letter to the curator.


“Kindly bear with us whilst we seek clarification on the issues raised in your letter from our group treasury,” said the letter to the curator.


The bank later responded in several letters in a bid to explain the issues.


According to court papers, CDH deposited GMB Bills with Zimbank on December 5 2003 as security. The bills were supposed to mature on March 4 the following year.


However, on realising that CDH was on the brink of collapse, Zimbank disposed of the Bills on January 7 2004.


According to the papers, Zimbank acknowledges that they sold the Bills.


In their first letter to the curator, Zimbank claimed that the Bills were provided for an overnight accommodation to the discount house.


“We have explained before, the bills were given to us in order for Century Discount House to obtain overnight accommodation from our group treasury department,” the bank said in a letter in May last year.


Zimbank said it had the right to sell the Bills because CDH had failed to meet its obligations for an overnight accommodation granted on December 30 2003.


However, the curator, represented by Farai Mutamangira of Mutamangira and Associates, shot down the claims in his answering affidavit and responses to Zimbank.


He said because the Bills were deposited on December 5 to Zimbank, they could not have been a cover for an accommodation granted on December 30 as the bank claims.


“If the overnight was granted on the 30th, the security ought to have been transacted on the same day or the previous day. It is very unusual and in fact not practice that a financial institution can place Bills with another for 25 days ahead of a single overnight accommodation,” Mutamangira said.


He said it was also highly unlikely that Zimbank could have accommodated CDH on December 30 because by that date the bank was already rejecting the discount house’s cheques.


“Again on December 30 2003, according to the CDH bank statement, the respondent virtually unpaid all cheques drawn by CDH against its current account,” Mutamangira said.


“Clearly it is inconceivable how the respondents could have on one hand accommodated CDH overnight and on the other unpay almost all their cheques,” he said.


Mutamangira said it was impossible that the bank could have been offered an overnight accommodation when its account had been overdrawn to the tune on $17 billion.


“Clearly with such a debit balance it is inconceivable how overnight accommodation could have been granted.”


He said it was apparent that the Bills were delivered to cover a previously unsecured debt.


The lawyer argues that there were indications that the bank knew that CDH was in trouble because ENG Asset Management’s bankers had taken over the discount house earlier.


It is for this earlier exposure that Zimbank demanded the Bills and later sold them to minimise their damage, the lawyer said.

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