Bid to save Access Financial Services fails

Bid to save Access Financial Services fails
By Inonge Noyoo
Friday April 25, 2008 [04:00]

THE Supreme Court has set aside the High Court judgment that quashed the Bank of Zambia's decision to close Access Leasing and Access Financial Services companies. This is a matter where the Bank of Zambia (BoZ) had taken possession of Access Leasing and Access Financial Services because the two companies were conducting business in breach of the banking and financial services Act as well as engaging in unsafe and unsound practices.

The central bank resolved to take possession of the two companies pursuant to section 81 of the banking and financial services Act CAP 387 of the Laws of Zambia. Subsequent to the central bank's decision, the two companies sought judicial review before High Court judge Japhet Banda who ruled that the bank's decision to liquidate Access Leasing and Access Financial Services was ultra vires as the companies had not been declared insolvent.

The High Court ruled that the bank's decision to close the two companies was invalid, void and ultra vires. The High Court judge further pointed out that BoZ had an alternative remedy under section 84(B) (a) of the banking and financial services Act if they wished to take any action.

Following the High Court judgment, BoZ appealed on grounds that the High Court misdirected itself in law when it held that the respondent could only order the compulsory liquidation of the bank or financial institution under section 84B (b) as read together with section 101(i) of the banking and financial services Act.

The central bank argued that the lower court failed to appreciate that under section 84(a) (iv) the bank was empowered to take any action which was necessary to enable it carry out its functions.

BoZ contended that the lower court misdirected itself in law and fact when it held that the bank had failed to prove the insolvency of the two companies.

Delivering judgment yesterday on behalf of Justice Lombe Chibesakunda and Justice Christopher Mushabati, Chief Justice Ernest Sakala said the trial judge was in error in suggesting or holding that a solvent company cannot be placed under compulsory liquidation.

Chief Justice Sakala said such a position was contrary to section 101 of the banking and financial services Act.

"Section 101 does not require the respondent bank to establish insolvency of a bank or financial institution. It gives the Bank of Zambia a general power to place a financial institution under compulsory liquidation irrespective of its financial status.

We agree that there is no requirement under the Act that section 101 be read only in conjunction with section 84B nor is there any requirement in the Act that section 101 can only come into operation if a financial institution is insolvent," Chief Justice Sakala said.

He said section 101 gave BoZ a general power to place a financial institution under compulsory liquidation irrespective of its financial status.
Chief Justice Sakala said the trial judge erred in holding that a solvent company cannot be placed under compulsory liquidation.

However, he dismissed one ground saying while the court accepted the law that the director cannot be allowed to maintain an action in the names of the company under compulsory liquidation, BoZ had not appointed the liquidation manager.

Chief Justice Sakala said Chungu could still have proceeded with the action in the absence of the two companies.