Chinamasa disowns Meikles debt

Published: 31 August 2017

GOVERNMENT has disowned Meikles Limited's $90 million claim over a two-decade old Reserve Bank of Zimbabwe (RBZ) debt and has made a counter demand, saying it had overpaid the hospitality and retail group by about $30 million.

According to court documents seen by The Financial Gazette, Finance and Economic Development Minister, Patrick Chinamasa, claims Meikles actually owes government more than $30 million after it was overpaid when it charged high interest rates in violation of the law.

Chinamasa said Meikles was overpaid through $76,1 million in Treasury Bills.

He averred that at the time the payment was made, the debt - plus interest at the inflated rate - had reached $49 million.

In 1998, the RBZ used some of Meikles' funds relating to the group's listing on the London Stock Exchange that had been deposited with the central bank. The initial debt was for $20 793 926,93 but as at May 31, 2014, it had reached $49 645 655. The court papers said as of July this year, Meikles claimed the debt stood at $89 million, more than four times the capital amount.

Chinamasa, who had failed to file his arguments within the prescribed timeframe, successfully appealed to the High Court against efforts by Meikles to bar him from defending government in the lawsuit, which the company instituted last year.

Chinamasa told the court that he did not file the papers because he, together with RBZ governor John Mangudya, had been holding discussions with Meikles chairman, John Moxon, and were under the impression that the legal route had been suspended.

In May this year, Moxon told the company's shareholders that a deal had been struck with government under which the company was going to be paid eight percent interest from 1998 to August 2015 (when government – through the Debt Assumption Act – took over the RBZ debts). Interest rate was to run at five percent until full payment had been made.

Meikles sued government last year, claiming that the five percent interest that government wanted to pay on the debt was lower than the eight percent that had been agreed.

It wanted the court to declare the Debt Assumption Act unconstitutional, claiming that it violated property rights as it amounted to illegal deprivation of property.

Chinamasa managed to persuade the court to allow him to file his notice of opposition out of time after claiming that the issues raised by Meikles on the constitutionality of the Debt Assumption Act were of national importance because they have a bearing on other debts assumed by government.

He also argued that there was real potential of Treasury failing to recover substantial amounts of money that had been over-paid to Meikles. He wants the court to decide how much was actually due to the group in view of the in duplum rule which he insists was violated.

The in duplum rule is a common law principle which provides that interest on a debt will cease to run where the total amount of arrear interest has accrued to an amount equal to the outstanding principal debt.

High Court judge, Justice Mary Zimba-Dube granted Chinamasa's application.

"This litigation is of national importance," Zimba-Dube said in her ruling.

"The resolution of the constitutional issues raised will have a bearing on all other debts assumed."

She said the application by Chinamasa raised important constitutional and legal issues "that cannot be rubbished, but need to be followed up and a pronouncement made".

"This matter involves precious public monies. We are seized with an economy beset by poor performance. This court cannot allow the respondent (Meikles) to bar the applicant (Chinamasa) from proceedings involving such huge sums of monies in a case where there is doubt regarding the exact amount of monies owed," the judge added.

"It is not prudent to burden the fiscus with payment of monies that may otherwise not be due to the respondent. It is not desirable in cases involving public monies to dispose of such matters on the grounds of technicalities. Technicalities are a tool meant to aid justice."

- Fin Gaz

Tags: Chinamasa,