Future of US$16M Performance Bond Unclear as Court...

Future of US$16M Performance Bond Unclear as Court Stays Zimnat Case

Nyashadzashe Ndoro- Chief Reporter

Zimnat Lion Insurance Company Limited’s application for a declaratory order regarding a US$16 million performance bond—claimed to have been affected by statutory instruments—has been stayed by the High Court of Zimbabwe.

The ruling, handed down by Justice Maxwell Takuva on May 6, 2025, defers the matter pending the finalisation of a separate Supreme Court appeal involving the National Social Security Authority and Housing Corporation Zimbabwe (Private) Limited.

The dispute centers on a performance bond initially valued at US$16 million, which Zimnat Lion issued in favour of NSSA at the request of Housing Corporation Zimbabwe.

Zimnat Lion argues that the bond’s value was subsequently affected by Statutory Instrument 33 of 2019, which converted it to RTGS16 million, and later by Statutory Instrument 60 of 2024, which reduced it to ZIG$6,400.00.

The core of the matter stems from a Housing Offtake Agreement between NSSA and Housing Corporation Zimbabwe, under which the latter undertook to construct and deliver housing units to NSSA. Zimnat Lion became involved when Housing Corporation Zimbabwe approached it to issue the unconditional and irrevocable performance bond.

A dispute later arose between NSSA and Housing Corporation Zimbabwe, leading NSSA to demand payment from Zimnat Lion on July 25, 2018.

However, Zimnat Lion withheld payment pending the outcome of arbitration proceedings initiated by Housing Corporation Zimbabwe against NSSA. Housing Corporation Zimbabwe was successful in the arbitration.

That award was later challenged in the High Court and is now under appeal before the Supreme Court under case number 334/23, with judgment currently reserved.

NSSA has indicated its intention to claim the full US$16 million guarantee from Zimnat Lion if the Supreme Court rules in its favour. This potential future claim prompted Zimnat Lion to seek a declaratory order from the High Court regarding the applicable currency.

Justice Takuva, while acknowledging Zimnat Lion's concerns, found the application to be premature. The court held that the relief sought by Zimnat Lion is inextricably linked to the outcome of the Supreme Court appeal.

If the Supreme Court upholds the arbitration award in favour of Housing Corporation Zimbabwe, the liability on the performance bond might be extinguished, rendering the currency question academic.

The judge emphasised that deciding the currency issue now would not affect the ongoing Supreme Court proceedings and could potentially cause an unnecessary “muddle” if the High Court’s decision were to be appealed to the same Supreme Court handling the substantive matter.

The court also noted that Zimnat Lion would suffer no prejudice if the Supreme Court case is finalised first, allowing the currency issue to be pursued only if NSSA succeeds in its appeal.

This approach, the court reasoned, would ensure consistency in judicial decisions. The matter has been formally stayed pending the outcome of the Supreme Court case.

“Nonetheless, this is not to say that I do not appreciate the concern brought by the applicants. SI 33/19 came with its effects, but whether or not this specific performance bond was also affected is an issue that ought to be resolved when the first and second respondents resolve their issues through the decision of the Supreme Court,” the judge stated.

“I don’t see any prejudice that the applicants will suffer if the Supreme Court matter is first finalised, and if the first respondent indeed succeeds, the issue of currency may then be pursued. It is my considered view that this will be a cleaner approach to the matter in order to uphold consistency in our courts.

"No declaration of rights as between the applicant and the first respondent can be made. No conversion can arise of an obligation that is currently unknown.”

Representing the applicant, Zimnat Lion Insurance Company Limited, was T. Chagonda of Atherstone and Cook. E. Chiweshenga and E. Homera of Zvimba Law Chambers appeared for the first respondent, the National Social Security Authority.