Bank under fuel company siege

THE High Court has dismissed Engen Petroleum Pvt Ltd’s application for leave to execute pending appeal in a case where the fuel dealer is demanding close to US$1 million from the Infrastructure Development Bank of Zimbabwe (IDBZ) over a botched 2010 fuel deal.

By Hazel Ndebele

The matter has been dragging on in the courts since 2011.

Documents show that the dispute arose after the government-owned financial institution acted as a guarantor for a fuel loan to one of Engen’s clients, Wedzera Petroleum, which failed to pay for fuel delivered, prompting the fuel dealer to pursue the bank.

The IDBZ is, however, refusing to concede to Engen’s demands, arguing that the guarantees were issued fraudulently by one of its former employees.

High Court judge Justice Joseph Mafusire ruled that Engen could not be granted leave to execute until appeal is heard in the matter being held under case number HH270-17. The fuel dealer wanted leave to execute so that it is paid US$848 000, an amount it is demanding from the IDBZ.

“…given that the appeal is set to be argued only in a month’s time, I have considered it more prudent and more expedient and more practical to allow the appeal to be heard without upsetting the status quo,” said Mafusire.

According to the documents, Engen’s decision for its application for leave to execute was due to the fact that it believes that the bank’s appeal is a ploy to buy time and stave off the day of payment as it had no prospects of success.

In April 2011, Engen sued Wedzera Petroleum Pvt Ltd jointly with IDBZ as it sought to recover US$848 000 plus interest and costs. The claim, according to court papers, arose out of petroleum fuels which were sold and delivered to Wedzera Petroleum but were not paid for.

The IDBZ is, however, arguing that its ex-employee Francis Mugwara, who was the head of corporate banking at the time, had allegedly issued the guarantees fraudulently without authorisation.

On April 15 last year, in case number HH253-16 the High Court ruled that the IDBZ pay Engen US$848 000 together with costs of suit and interest at the prescribed rate from the date of the judgement to the date of payment. Five days after the judgement, the IDBZ appealed.

The documents show that prior to the fuel credit, Wedzera used to buy bulk fuels from Engen for cash, but as its sales increased the company wanted more fuels on credit and Engen obliged. Wedzera is said to have signed Engen’s standard credit facility application form which was cleared from Engen’s head office in South Africa.

Mugwara, according to the court documents, confessed to IDBZ employees Norbet Munengwa, who was the assistant director for private sector projects and Desmond Matete, the director for legal and corporate services, that he was bribed by the owner of Wedzera Petroleum for him to sign and provide the guarantees.

“Munengwa and Matete accused Mugwara of fraud. They said when they confronted him after Johannes Mudzengerere (Engen’s managing director at the time) called up the guarantees and was pressing for payment, Mugwara had broken down and confessed to having been paid by Wedzera’s managing director Eric Nhodza an amount in the sum of US$10 000 in return for the guarantees,” reads the document.

“The bank had raised misconduct charges against him. However, he had ducked out of the disciplinary process by resigning.”

According to the bank, Wedzera was not and has never been a customer of the bank and that, contrary to its standard operating procedures, there was no record of any account having been opened for Wedzera before or after the guarantees had been incepted. The court papers say there were no bank charges raised as fees for the guarantees and there was no paper trail relating to them.

“As far as the bank is concerned the purported guarantees had been an abuse of the bank’s stationery by Mugwara. They were invalid,” papers say.

The bank contends that Mugwara had no authority to grant the guarantees as all bank guarantees have to be countersigned.

Engen, however, argues that the bank’s defence is misconceived as Mugwara had the authority to issue guarantees.

“From the facts, Mugwara had the actual authority to issue the guarantees in question. He was the head of the bank’s unit that had the requisite mandate to issue the guarantees in question. Mugwara’s contract of employment empowered him to issue such guarantees,” it says.

According to Engen, it was satisfied with accepting guarantees from the IDBZ since it is a government bank.
A decision as to whether the IDBZ will pay Engen the money it is demanding will be made after the appeal by the bank is heard on May 23.

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