Access Financial Services Ltd and Anor v Bank of Zambia (SCZ 7 of 2005) [2005] ZMSC 3 (25 June 2005)

82 SCZ NO. 7 OF 2005 APPEAL NO 88/2003 IN THE SUPREME COURT OF ZAMBIA HOLDEN AT KABWE AND LUSAKA (CIVIL JURISDICTION) BETWEEN: ACCESS FINANCIAL SERVICES LIMITED ACCESS LEASING LIMITED I'* Appellant 2nd Appellant AND BANK OF ZAMBIA Respondent Coram : Sakala, CJ, Lewanika, DC] and Chirwa, ]S on 6"' August 2003 and 23nl June 2005. lor the Appellants: Mr J Sangwa and Mr R Simeza of Simeza Sangwa & Associates lor the Respondent: Mr N NchitoandMrM Nchito of MNB Legal Practitioners with Mr L N Kalande, Legal Counsel, Bank of Zambia JUDGMENT C'hirwa, JS; delivered the judgment of the Court:- C.ises referred to: _ ____ 1. 2. 3. 4. 5. 6. 7. Chief Constable of North Wales Police v Evans [1982] 1 W. L. R 1155 R. V Epping |1983] 3 All. E. R 357 R. V. Chief Constable of Merseyside Police ex-parte Calaveley and others [1986] 1 All. E. R. 257 RV Hall Storm, ex-parte W [1985] 3 All E. R. 775 Magnum (Zambia) Limited v Basit Quadri (In receivership) and Grindlays Bank International Ltd [1981] Z. R. 141 Avalon Motors Ltd (In receivership) v Bernard Leigh Gadesen and — Motor City Ltd SCZ judgment No 7 of 1988 Derrick Chitala (Secretary of Zambia Democratic Congress) v Attorney General SCZ judgment No 14 of 1995 Frederick Jacob Titus Chiluba v Attorney General Appeal No. 125 of 2002 Parsons v B N M Laboratories Ltd [1963] 2 E.. R. 658 Chandler v D. P. P [1962] 3 All E. R. 142____________ _________ ______ 8. 9. 10. 11.------ BoTre~tFMehtaI Health Review tribunal [1985] 3 All. E. R. 330 12. R V Inspector of Taxes [1986] 2 All E. R. 37 - J2 The delay in delivering this judgment is deeply regretted, bearing in mind that the appeal is on a preliminary point only- I he delay has been due to great pressure of work the Court had until very recently. This is an appeal against the decision of the High Court discharging the ex- parte order granted to the appellant for leave to issue judicial review proceedings against the decision of the respondent to take possession of the two appellants under the Banking and Financial Services Act, Cap. 387. I here is also a cross-appeal by the respondents against that part of the High Court judgment that held that proceedings under Section 84 C of the Banking and Financial Services Act specifies no mode of commencement of the proceedings under it and that judicial review was an appropriate mode to question the respondents decision to take possession of the appellants. A little bit of background is necessary in this matter. The appellants are financial institutions carrying on business under the Banking and Financial Services Act, Cap. 387 of the laws . The respondent is the supervisor of the appellants under the said Act. On the 13lh January 2003, the respondent, by a Board Resolution, resolved to take possession of the appellants pursuant to powers given to it under Section 81 of the Banking and Financial Services Act. It was the opinion of the respondent that the appellants were engaged in unsafe and unsound, practice of carrying out their business and that a number of other breaches had been committed by the appellants, the respondent felt that it was in the interest of the banking world and the public at large that it had to take possession of the appellants. 84 Being aggrieved bv the respondent's decision to take possession of the appellants, the appellants, through their lawyers filed in the High Court a notice for leave to apply for judicial review pursuant to Order 53 rule 3 of the Rules of the Supreme Court. A detailed statement in support of the application was filed in the Court below supported by an affidavit by one Aaron Chungu, a shareholder and Director of the appellants. The learned trial judge granted the ex-parte leave to apply for judicial review. At the hearing of the judicial review, Counsel for the respondent raised two preliminary applications to have the leave discharged. The first ground of objection was that the appellants failed to follow the avenue of appeal against possession as provided for in the Banking and Financial Services Act. The second ground was that the shareholders and Directors of the appellants cannot institute an action in the names of the respondents because they had no authority to do so without the respondents' consent. On the first ground, it was submitted, on behalf of the respondent that if the appellants were aggrieved with the action taken by the respondent, they should have followed the provisions of Section 84 C of the Banking and Financial Services Act and that judicial review was not an appropriate action. It was submitted that under that Section, the respondent is required to show cause why possession should not be terminated and as such this cannot be done through judicial review as judicial review was concerned with the manner in which any power is exercised. Judicial review is concerned with matters such as whether the authority or person had the power to act as he_ 85 did and if that was done according to the law and not the merits of such an action, it was submitted. To augment this argument, the cases of CHIEF CONSTABLE OF NORTH WALES POLICE V EVANS (1) and R V EPPING (2) were relied upon. In response to this objection, it was submitted that Section 84 C of the Banking and Financial Services Act empowers any one aggrieved by the respondents' action to commence proceedings to challenge the action taken and the Section does not preclude proceedings by way of judicial review. It was further argued that as the order of certiorari to quash the Bank of Zambia decision was the same thing as asking the Bank to justify its decision to take possession of the appellants the same could be challenged by way of judicial review. In support of this argument, the cases of R V CHIEF CONSTABLE OF MERSEY SIDE POLICE EX-PARTE CALEVELEY and others (3) and R V HALL STORM, EX-PARTE (4) were cited as authority. In considering this first preliminary objection, the learned trial judge held the view that it was proper by bringing an action for judicial review under Section 84 C of the Banking and Financial Services Act as the Section itself does not provide how the process are to be commenced under that Section. In the absence of the manner of commencing _the proceedings, the aggrieved party was given latitude to commence the proceedings to use the mode dictated by the circumstances of a particular situation. This decision is subject of the cross-appeal. _____ 86 In arguing the second ground of the objection, it was submitted that the shareholder or director had no authority to commence an action in the name of a company under receivership and that in the present case the action has been commenced in the names of the companies under possession, which is like receivership,' without the consent of the respondent. The cases of MAGNUM (ZAMBIA) Ltd v BASIT QUADRI (In Receivership) and GRINDLAYS BANK INTERNATIONAL ZAMBIA Ltd (5) (and AVALON MOTORS Ltd (In receivership) v BERNARD LEIGH GADESEN AND MOTOR CITY Ltd (6) were relied on. It was submitted that since upon taking possession of the appellants, the running of their business was vested in the respondent and as such, no action can be commenced without the consent of the respondent. In reply to these submissions, on behalf of the appellants, it was submitted that, under Section 84 C, any interested person may sue and the shareholders and Directors of the appellants, as interested persons, have sued in the name f the appellants and there was no need to obtain consent of the respondent. It was submitted that the cases of MAGNUM ZAMBIA Ltd (5) and AVALON MOTORS Ltd (6) are inapplicable to the present case as those cases dealt with cases under receivership, whereas the appellants here are not under receivership. The learned trial judge considered the arguments on this preliminary point of objection and the provisions of Sections 81 and 84 A of the Banking and Financial Services Act and held that the effect of taking possession of any financial institution by the Bank of Zambia and looking at the powers Jb provided to it under Section 84A , the possessed bank or financial institution is for all purposes, under receivership and that on the authorities of this Court, only the receiver can bring an action in the name of the company under receivership. The shareholders and Directors may take action in their own names, he found. In conclusion, he held that as this objection was at the heart of the appellants' application and as the objection succeeded, the proceedings as commenced by the appellants, were a nullity and dismissed the action. It is against this order dismissing the action that the appellants have appealed. There are two grounds of appeal, namely:- That the learned judge in the Court below misdirected himself in law when he held that Directors and Shareholders of the Bank or financial Institution in possession have no locus standi to sue in the name of such entity in possession. The learned judge erred in law when he held that the proceedings herein were a nullity on ground of misjoinder of parties and accordingly dismissed the action with costs. Both parties filed detailed heads of argument in the appeal and the cross appeal on which they relied on in addition to the oral arguments. In arguing the first ground of appeal, reliance was placed on Section 84 C which provides that “within a period of 21 days after the date on which the Hank of Zambia takes possession of a bank or financial institution, the bank or financial institution or any interested person acting on its behalf may institute proceedings in Court to require Bank of Zambia to show cause why the possession should not be terminated”. It was submitted that it was clear from the section that a bank or financial institution or any interested person such as shareholders or directors may challenge the Bank of Zambia's decision to take possession of the institution and relying on this Court's decision in the case of AVALON MOTORS LIMITED (In Receivership) v BERNAND LEIGH GADSDEN and MOTOR CITY LIMITED (6), the matter was properly brought in the name of the appellants. It was further argued that the learned trial judge never referred to Section 84 C in his judgment but laid emphasis on Section 81 which had no relevancy to the question of whether the shareholders and Directors can sue the Bank of Zambia in the name of the financial institution. In response to this ground of appeal, it was submitted that the learned trial judge was right in referring to Section 81 of the Banking and Financial Services Act, because that Section gives power to the Bank of Zambia to take possession of .a bank or financial institution and after it has taken possession of the institution, its powers are outlimited in Section 84A. These powers include initiating or defending and conduct, in the name of the bank or financial institution any action or legal proceedings. It was further submitted that even if the shareholders or directors have their rights, they cannot commence an action in the name of appellants. It was submitted in conclusion that the learned trial judge was right to liken possession under the IS Act to receivership hi an ordinary company and in such a situation it is the receiver who can be sued or can sue and in the present case, it is only the respondent who can institute any proceedings in the names of the appellants in the course of managing them. We have considered the submissions on behalf of the parties on this ground and the authorities referred to and also the judgment appealed against. We cannot fault the learned trial judge's holding that a bank or financial institution possessed by the Bank of Zambia under the Banking and Financial Services Act, is in the same position of an ordinarv company placed under Receivership. Once a Company has been placed under receivership, although it still remains an independent entity, cannot sue or be sued in its own name but through the Receiver. Equally, under the Banking and Financial Services Act, once a bank or financial institution has been possessed by the Bank of Zambia, it cannot sue or be sued in its own name. The authority relied upon by the appellants of AVALON MOTORS LIMITED (In Receivership) v BERNARD LEIGH GADSDEN and MOTOR CITY LIMITED (6) clearly stated this that shareholders or directors properly interested and who have a beneficial interest to protect, can sue a wrongdoing Receiver or former Receiver in their own names and in their own rights. In the present case, the applicants for judicial review were financial institutions that were possessed by the Bank of Za^nbia and who, under the Banking and Financial Institutions Act, were managed and controlled by the Bank of Zambia. If the shareholders or directors brought the action in their own names and in their own rights, the Court would entertain them in line with the AVALON MOTORS case. We can, therefore, not fault the finding of the learned trial judge that the J9 shareholders and directors had no locus standi to sue in the name of the financial institutions possessed by the Bank of Zambia. The first ground of appeal has no merit and it is dismissed. I’he second ground of appeal is that the learned trial judge erred in law when he held that the proceedings herein were a nullity on the ground of misjoinder of parties and accordingly dismissed the action with costs. We have considered the written submissions on this ground of appeal and the response. We feel this ground can be disposed off very quickly. We have looked at the judgment of the learned trial judge. Nowhere does he say that he dismissed the action for misjoinder. He simply said that busy bodies that purported to sue the Bank of Zambia in the names of the appellants had no locus standi or power to sue the Bank. In any event, this alternative argument was never argued before the Court below to persuade it to exercise its discretion to substitute the parties. The ground of appeal also fails. This appeal is therefore dismissed with costs. We will now consider the cross-appeal. There is only one ground of cross­ appeal and this is that the learned trial judge misdirected himself in law when he held that Section 84 C of the Banking and Financial Services Act, does not specify the form the proceedings should take and that anyone can use the model dictated by circumstances of a particular situation. — — In arguing this ground of cross-appeal, detailed written submissions were rendered by the parties and they also made some emphases in their oral __________ arguments. We will try to put the gist of each party's argument. 91 I he respondents gist of argument is that, even accepting that Section <84 C of the Banking and Financial Services Act does not give the method by which one can institute proceedings under the Act, judicial review is certainly not one of them if the taking of possession is challenged. It was argued that the cardinal element in a judicial review is not to go to the merits of the decision made but whether the institution making the decision had the power to do so, whether those powers were exercised with due regard to the principles of natural justice anil such powers were not exceeded. Judicial review, it was arg,tied, deals with decision-making process itself and not the merits of the decision. In this regard the cases of DERRICK CHITALA (Secretary of Zambian Democratic Congress) v ATTORNEY GENERAL“(7), CHIEF CONSTABLE OF NORTH WALES POLICE v EVANS (1) and FREDERICK JACOB TITUS CHILUBA v ATTORNEY-GENERAL (8) were relied upon. In response to these arguments, for the appellant, it was argued that the respondents seemed to have relied on the marginal notes to Section 84 C as an aid to its construction. It was argued that this was not the proper approach as this was not an appeal and the cases of PARSONS v B. N. M LABORATORIES LIMITED (9) and CHANDLER v D. P. P. (10) were relied upon. It was further argued that Section 84 C does not provide for an appeal and the purpose of the Section can only be inferred from the Section itself. It was submitted that as the Section provides for an aggrieved party to require the Bank of Bank to show cause why possession should not be terminated. It was argued that since the Section does not provide for the modalities of HI challenging the taking of possession and as the matter is not an appeal, the process of judicial review is very appropriate because under Order 53 the remedies are wide and it is easier to investigate facts under the Order and that the appellants complaints centred more on fairness and reasonableness. It was submitted that under Order 53 there are many remedies such as declaration that taking possession was wrong; that the parties were entitled to be heard; that the decision was made in bad faith and for an improper purpose and even seek an order for prohibition or injunction and damages. For this argument, the cases of BONE v MENTAL HEALTH REVIEW TRIBUNAL (11) and R. V INSPECTOR OETAXES (12) were relied upon. In the alternative, it was argued that should the Court be of the view that proceedings under Section 84 C and those for judicial review pursuant to Order 53 of the Rules of Supreme Court are irreconcilable, this Court has power to order that the proceedings continue as if commenced by a writ and this was possible under Order 59 rule 9 of the Rules of Supreme Court. We have considered the portion of the judgment of the Court below that dealt with this objection and the lengthy and learned submissions before us. From the outset we must state that we agree with the authorities cited by Counsel for the appellant on the effect of side-notes to a Section in an Act of Parliament have no legislative value and cannot be said to be enacted in the same sense as the long title or any part of the body ofthe Act. This js clearly, borne out if we look at Section 9 and 10 of the Interpretation and General Provisions Act, Cap. 2 which provide that schedules, tables together with the notes thereto and subdivisions of the Act, titles or subdivisions shall be taken —TTOttcenof’nvatl'courts. Nowhere are side-notes mentioned to be part of the * P- |aw. They arc a mere guide. The meaning of the Section must be construed from it either on its own or with other sections. We therefore agree that any action under Section 84 C is not an appeal. Section 84 C reads as follows:- "S4 C. Within a period of twenty-one days after the date on which the Hank of Zambia takes possession of a Bank or financial institution, the bank or financial institution or any interested person acting on its behalf may institute proceedings in Court to require the Bank of Zambia to show cause why possession should not be terminated". (Underlining our own). Under this Section any interested party of the possessed bank or financial institution may institute proceedings in Court for the Bank of Zambia to show cause whv possession should not be terminated. It is accepted that the section does not provide how the proceedings are to be instituted. Under Order VI of the High Court Rules, unless otherwise provided by any written law or the Rules, every action in the High Court is commenced by a Writ of Summons endorsed and accompanied by a full statement of claim. We do not see any difficulty in the fact that the Section 84 C does not state how the proceedings can be instituted for the Rules are very clear. All actions must be commenced by a Writ of Summons endorsed and accompanied by a full statement of claim. It has been argued that Order 53 was used because it is wider in terms of the remedies that can be obtained. But that is not the purpose of judicial __ review. The-purpose of-judieial review, after so many English cases and our )13 own cases, is now a law school classroom affair, and Order 53 itself is very clear. The purpose is to check on administrative actions and these are generally on the issues of Illegality; whether the decision making body or authority acted according to the law and within its powers. Irrationality, whether the decision making body acted so unreasonably that no reasonable authority would have made the decision; and procedural impropriety, whether the decision making body failed to act fairly. These have clearly been brought out in our decisions such as DERRICK CHITALA (Secretary for Zambia Democratic Congress) v ATTORNEY GENERAL (7) and FREDRERICK JACOB TITUS CHILUBA v ATTORNEY GENERAL (8 ) in which various English authorities were reviewed and adopted. A study of the statement in support of the application for leave to apply for judicial review and the affidavit in support clearly show that this is not a proper case for judicial review. We hold, therefore, that the learned trial judge misdirected himself when he held that since Section 84 C of the Banking and Financial Services Act did not provide how the proceedings under that Section were to be instituted, a party was free to adapt any procedure that fitted the circumstances. Order VI of the High Court Rules provides the answer. We therefore allow this cross-appeal with costs. J14 Costs are in both the appeal and cross-appeal and the Court below, to be taxed in default of agreement. E L Sakala CHIEF JUSTICE I) M Lewanika DEPUTY CHIEF JUSTICE D K Chirwa JUDGE OF THE SUPREME