Norsad Finance Limited v Ulendo Rinp Plc (In receivership) and Ors (2019/HPC/012) [2020] ZMHC 418 (15 December 2020)

IN THE HIGH COURT FOR ZAMBIA AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) 201 9/HPC /01 2.:: AMG GLOBAL TRUST LIMITED THIRD DEFEND ANT LUSAKA SECURITIES EXCHANGE PLC FOURTH D EFEN D ANT Before the Honourable Mr. Justice K. Chenda on the 15th d ay of De(;emb er 2020 For the Plaintiff: Mr. A. Dudhia and Mr. M. Ndalwneta of Mus a Dudhia and C:J1npany For the First Defendant: Mr. B. Gondwe and Mr. I Siluiamba of Buta Gondwe a nd Co111;)a11y For the Second and Fourth Capt. I. M. Chooka of Milimo Choo/ea ancl 1\ssu,:inte.<; Defendants: For the Third Defendant: Mr. E. Mbewe of Muyatwa Legal Practitio1ter.s ------------------------------------------------------------------------------------------ JUDGMENT ------- -·-------- ---------------------------------------------------------------- Legislation Referred to: (i) The Securities Act, No. 41 of 2016 in-s el'tions 67(2). f!(l} :-u1cl ~,11_~ '..') and paragraph 4(b) of the Second Schedule • Rules of Court: (ii) The High Court Rules in Order 53 Rule 6(2),(3) and (-'.l·J under C h a;:•r--~r 27 of the Laws of Zambia Case Law: (iii) Galaunia Farms Limited v Nationa l Milling Company Limited (2 004) '-: R 1 a t pages 9-10 (iv) Bidvest Food Zambia Limited & 4 Ors v CAA Import & Export Lim.ited - Appeal No. 04/2018 at J48 (v) Anderson Mazoka & Ors v Levy Mwanaiuasa & Ors (2005) ZR 138 at page 158-159 (vi) Madison Investment, Property and Advisory Company Limited u Peter Kanyinji - Selected Judgment No. 48 of 2018 at J36-38 Authoritative Text: (vii)Snell's Principles of Equity 26th Edition (1966) London: Sweet and Mr1xwell at page 295 1. INTRODUCTION AND BACKGROUND 1.1 The Plaintiff was for all intents and purposes an investor in the road infrastructure note programme established by the First Defendant as issuer (the "Note Programme"). 1.2 The notes were listed on the securities excha nge market operated by the Fourth Defendant. 1.3 The Second Defendant and Third Defendant were respectively the note trustee and security trustee under the Note Programme. 1.4 Following the Plaintiff's investment in th e Note Programme to the tune of USD12 .5 Million a nd dissatisfaction vvi th the outcome thereof, the Plaintiff sued the Defendants s ee king the following reliefs in the amended statement of claim filed on 16th April 2019: J2 i} an order for payment of the sum of USD12 ,500,000 being the amount owed by the First Defendant to the Plaintiff under the Note Programme; ii) iii) damages for breach of contract by the First Defend ant; an order for payment by the First and Second Defendants of the sum of US$2, 108,698 being interest on the Plaintiff's secured notes up to the maturity date which interest shall continue to accrue until full settlement of the principal sum; iv} an order to compel the Third Defendant to enforce and realise the security held on behalf of the Plain tiff; v} damages for breach of contract by the Se cond Defendant; vi} damages for breach of contract by the Third Defendant; vii} damages for negligence by the Second Defendant; viii} damages for negligence by the Third Defendai1.t; ix} x} damages for negligence by the Fourth Defendant; damages for breach of statutory duty by the Fourth Defendant; xi) an order for the First Defendant to account for hov.r the US$12,500,000 paid to the First Defendant was utilised; xii) an order to lift the veil of incorporation and to make the Fourth Defendant liable for the debts and 1nisdeeds of the Second Defendant; xiii) a declaration that any assets purchased with monies paid out of the bank account in breach of trust are subject to a constructive or resulting trust in favour of the Plaintiff and they should be delivered by the First Defendant to the Plaintiff to deal with as owner thereof J3 and all ancillary orders or directions as rn ay be necessary to ensure that the resulting trust may be enforced by the Court; xiv) a tracing order to recover the proceeds of the monies taken out of the bank account in breach of trust; xv) interest of any damages awarded frmn the date v,,hen the cause of action arose to the date of judgment; xvi} further or other relief; and xvii) costs of and incidental of this action. 1.5 The Plaintiff eventually discontinued its case as against the Third Defendant by consent order dated 11 u, March 2020 and also resolved its differences with the First Defendant at mediation. 1.6 The latter conclusion is evidenced by settle1nent order dated 27th July 2020 in which the First Defendant ceded to the Plaintiffs claims. 1. 7 By that time the Plaintiff had a lready presented its case and the First Defendant too in part before the mediation settlement. 1.8 The matter concluded with the trial of the case as between the Plaintiff on the one hand and the Second and Fourth Defendants on the other. J4 2. MATERIAL FACTS AND ISSUES 2 . 1 The following facts are common cause when one con siders the pleadings of the Plaintiff and joint plea ding of the Second and Fourth Defendant: 1 i) the Second Defendant is a body corporate appointed as note trustee under the Note Programme pursuant to a trust deed dated 5th October 2015 and a security trust deed dated 6th October 2015 (the "Trust Deed" and "Security Trust Deed") (see paragraph 26 of the amended statement of claim which has not been traversed by the Second and Fourth De fen cl a nt's defence); ii) on 5th July 2017 the Second Defendant wrote to Guarant Co Limited over the First Defendant's move to ~ cancelMOQ. of the deed of tranche guarantee elated December 2015 (the "Guarantee"), (see p aragraph 27 of amended statement of claim and the bare denial in paragraph 12 of the Second and Fourth Defendant's defence); iii) the Fourth Defendant is a public company licensed by the Securities and Exchange Comn1ission (SEC) to operate a securities exchange in Zambia (see paragraph 40 of statement of claim and 16 of defence of Second and Fourth Defendants); iv) the notes were admitted to the Fourth Defen dant's securities exchange (see paragraph 4 of the stateme nt of 1 By operation of Order 53 Rule 6(2),(3) and (4) of the High Comt Rule;:; created und er Ch c1pter 27 of the Laws of Zambia, any allegation of fact that is not 1raver ~ed b:v the resprm ding pleading from an opponent in a commercial action is deemed to b e r-tclmi t ted. JS claim and paragraph 1 7 of the Second and Fourth Defendant's defence); and v) the Plaintiff has not received payment from the Second Defendant as note trustee (see paragraph 31 of the amended statement of claim and the bare den ial in paragraph 15 of the Second and Fourth Defendant's defence). 2.2 The said set of pleadings also reveals the following controversy as between the Plaintiff and the Second ~ Defendant: i} the Plaintiff faulting the Second Defendant for allegedly being complicit in the wrongful canceJlation of a d eed of tranche guarantee by writing to the guarantor (Gu arant Company Limited} on 5th July 2017 supporting the First Defendant's move to the said cancellation thereby exposing the Plaintiff to loss; ii) the Plaintiff faulting the Second Defendant for allegedly not protecting the Plaintiffs interests by faili n g to consult with or seek the Plaintiff's ins tructions; failing to instruct the Third Defendant to preserve or enforce the securities for the notes follm,ving the First Defendant's default; and failing to appraise the Pl,-iintiff of the status of the notes; and iii) the Second Defendant contending that there ,vas no breach by the First Defendant owing to a restructure of the Note Programme which superseded the se cu rity documentation that had constituted the s ~x ond Defendant as note trustee. J6 2.3 As for the Plaintiff and Fourth Defendant, the pleadings disclose the following controversy: i) the Plaintiff accusing the Fourth Defendant of knowledge or that it ought to have kno-wn that the n otes were no longer secure as advertised and unlikely to be paid at redemption; ii) the Plaintiff faulting the Fourth Defendant of neglecting to issue a cautionary notice to the Plain tiff and other note holders or a suspension of trading notice or otherwise notifying them of the First Defendant's financial problems; and iii) the Fourth Defendant cross contending tha t: a) the notes were listed but never traded on its rn a rket exchange; b) it had no obligation to ensure that th e notes remained secure; and c) the Note Programme Me1nora ndum expr e ssly excluded liability for the Fourth Defendant. 2.4 The issues for determination are therefore as follows: A) as between the Plaintiff and th e Second Defendant - i) whether Second Defenda nt breached the Guarantee by issuing the letter or 5th July 20 17; ii) whether the letter of 5 th July 2017 had a n y effect on the cancellation process of the Guarm1.tee instituted by the First Defen dant ; iii) whether the Second Defenda n t o ther wise bre:Khed its duty to the Plaintiff as n ote trus tee; J7 B) as between the Plaintiff and the Fourth Defendant: iv) whether the Fourth Defendant acted in breach of statutory duty and / or duty of care to the Plaintiff; v) whether the Fourth Defendant was othenvise under statutory duty to the Plajntiff under section 99(2) and paragraph 4(b) of the Second Sche dule to the Securities Act and acted in breach th ereof (as pleaded by the Plaintiff); and vi) whether there is cause for the Second Defen dant's veil of incorporation to be lifted to make the Fourth Defendant liable for the Second Defendant's acts. 3. SUMMARY OF EVIDENCE 3.1 Given the settlement between the Plaintiff on the one hand and First and Third Defenda nts r espectively , this summ ;-1 ry is confined to the evidence relevant to the remainder of the case as between Plaintiff and Second and Fourth Defendants. 3.2 The Plaintiff's witness was Mr Ke nechukwu Du_ u ogu Chiedu Nwosu, its Chief Executive Officer , aged 46 years . 3.3 His testimony in chief was embodied in a witness statement filed on 22nd July 2019 together with the Plain tiff's pnm ary bundle of documents and supplementary b1-.111dle. J S 3.4 Under cross examination by Captain Chooka (Couns el for the Second and Fourth Defendants) Mr Nwosu testified th at: i) the Plaintiff decided to invest in the Note Program me after conducting its own due diligence exercise; ii) as part of its due diligence exercjse, the Pl aintiff reviewed the transaction documents for the f'>Jote Programme including the documents listed at page 65 of the Programme Memorandum as being available for (jj; inspection; iii) a wise and cautious investor would investigate each of the documents which the Programme Memorandum listed as available for inspection; iv) the role of Fourth Defendant over the Note Progra mme was only that of a securities exchange on ,vhose platform the notes were listed; v) the Programme Memorandum did not require the Second and Fourth Defendants to reviev.r the fin ancial position of the First Defendant; vi) the Plaintiff knew of the First Defendant's fin ,m cial difficulties as far back as December 2017 but only notified the Second Defendant of the event of default in September 2018 by letter dated 20 1h September 20 18; J9 vii) the Plaintiff was aware that by the time that it wrote the letter of 20th September 2018 to the Second Defen d ant, the First Defendant had already cancelled the Guarantee; viii) there was no document that obli gated '-' th e Second Defendant to exercise oversight over the relationship between the First Defendant a nd ATI ; ix) the relationship between the Second Defendan t and Guarant Co was governed by the Guarantee a ncl the Recourse Deed; x) there was no document that he was aware of \.,·hich required the Second Defendant to oversee the affairs of TCX; xi) there was no document that established a relationship between the Second Defendant and TCX; xii) clause 13 (a) (i) of the Guarar1tee did not r e quire the Second Defendant's approval b efore cancellation at the instance of the First Defendant; xiii) there was no document before Court which showe cl that the Fourth Defendant vvas e1npm~rered or required to oversee the operations of the Second Defe n dant; xiv) he agreed that SEC is the only entity tbat regulates the operations of both Second a n d Fourt h Defendant; ,,:·1 d JlO xv) the Plaintiff never requested the Fo1.,r th D efe nd::-tnt to take action against the First Defendant. 3.5 PWl also did not refute Capta in Chooka's assertion m cross examination that by clause 8.3 at page 3 1 of the Progr8mme Memorandum, the issuer could redeem any or all of the notes without seeking prior approval from the Second Defend;:, 11 t. 3 .6 When re-examined by Mr. Dudhia, Mr Nwosu testified t hat the Plaintiff invested in the Note Programme: i) after having assessed the impact tha t it ·would have on the market; and ii) because it was a listed programme overseen by the Fourth Defendant and covered by credit enhancements that would minimise any impact from failure. 3.7 The credit enhancements were interlinked and ·wer e 111 form of insurance cover by ATI and a liquidity guarantee (the Guarantee) by Guarant Co. 3.8 PWl also clarified that the due diligence exer cise done by the Plaintiff included commercial, financial and legal aspects of the Note Programme . 3. 9 The witness for the Second and Fourth Defendant was Ms Maria Mazyambe, a 32 year old employed by the Fuu rth Defendant as Legal Counsel and Company Secretary . J ll 3.10 Her evidence in chief was embodied in a witness statement filed on 15th August 2019; and she also relied on the First Defendant's bundle and supplementary bundle of clocu rnents which were already in evidence at the instance of the First Defendant. 3.11 When cross examined by Mr. Ndalam eta, Counsel for the Plaintiff, Ms Mazyambe testified that- i) the Fourth Defendant was previously known as Lu s aka Stock Exchange until a name ch a n ge in third quarter of 2015, it still however goes by the same acronym of "LuSE"; ii) the Second Defendant 1s referred to by the acronym "CSD"; iii) the Plaintiff had requested for a copy of the Trust Deed from Second Defendant prior to this suit; iv) the Second Defendant did not provide the copy as there were procedures in place for the Plaintiff to acces s the transaction documents and the Second Defendant was not under an.y obligation to provide information to note holders; v) the LuSE CSD under the Trust Deed is not both Second and Fourth Defendant; J12 vi} the Second Defendant is th e note trus tee under the Trust Deed and under clat.1.se 4.2 thereof h old s the benefit of all covenants from First Defendant on behalf of all note holders; vii} the document at page 316 of the Pluintiff's bund le of documents is a correct statement of the status or the Plaintiffs notes that USD 12.5m is still owing; viii) she disagreed that the Second Plaintiff would re1na in as note trustee until all notes are redeemed as accordi n g to her the Trust Deed provided for other ways in \vhich their trusteeship could be terminated; ix) the notes issued by First Defendant are listed on Fourth Defendant's exchange and Ms Priscilla San1pa 1s employed by both Second a nd Fo1..irth Defend ant as CEO for both and sole signatory of letters for both and a) the Fourth Defendant sometimes receives letters for the Second Defendant; b) the Second and Fourth Defendants operate o ut of same premises and Fourth Defendant pays the rent; c) the Second Defendant only h as one employe<": the CEO; x} the Second Defendant is n ot controlled by the Fourth Defendant; Jl3 xi) the Fourth Defendant is licenced under the Sec1.irities Act; xii) the Fourth Defendant approved the Note Program me despite the First Defendant n ot having a Bank of Zambia licence and instead relying on the lie en ce of another entity; xiii) there was no document on record to show that Ban k of Zambia authorised such an arrangement; xiv) there is nothing at page 18 of the First Defen dant's bundle of documents to validate h er vvitness statement paragraph 16 that FFS was authorised to use its licence for First Defendant; xv) the Guarantee was an essential part of th e Note Programme and so was ATI insur an ce cover; xvi) paragraph 23 of h er witness statem ent s poke abmit the intended operation but she could n ot tell the Court what actually happened; xvii) she is not aware of h ow m uch of the USD12. 5m invested by the Pla intiff was u sed as inten ded and the Fourth Defendant did not: a) check if the First Defendant \. Vas u sino' the mon c v as b ., intended; Jl4 b) ch eck that note holders were receiving their coupon payments; c) check that the transfer and paying agent was performing its function; xviii) the Plaintiff was entitled to up to two interest payments subject to other terms and conditions of the Guar::1ntee which included that there should be no outsta nding payment from First Defendant to Guarant Co Limited; xix) she disagreed that the First Defendant could not selectively redeem the note s but agreed that it would have to give notice to all noteholders of the redernp h on; xx) she disagreed that the Fourth Defenda nt and or Second Defendant had to ensure that all note holders r eceive notice of any redemption; xxi) by clause 8 of the Subscript ion Agreement, the First Defendant was required to give the Plaintiff notice s a t a stated Botswana address but the only notice of redemption was as per nevvspaper advert appeann g at page 537 of First Defendant's bundle ; xxii) one of the First Defendant's obligations under clause 6 of the Trust Deed was to keep t he Guarantee in plac-e ; J15 xxiii) clause 9.4.3 of the Trust Deed created a n obljgatic,n for the Second Defendant to noteholders to exercise diligence and prudence; xxiv) the Note Programme and Trust Deed required a n ·"xtra ordinary resolution to be amended; xxv) under clause 17 of the Trust Deed the Second Defendant can be liable for negligence; xxvi) the Second Defendant was party to the Security Trust Deed and was to act on behalf of and for the benefit of noteholders; xxvii) the Second Defendant appointed the Third Defenda nt as security trustee and by clause 6 of the Secur ity Trust Deed at page 130 of First Defendant's bundle it's the implementing person that was required to write to the Security Trustee which renders paragraph 3 2 (ij) of her witness statement incorrect; xxviii)the Second Defendant sign ed the Guarantee as trustee for and on behalf of notehold er s and the guar a n tee s um would be paid to the Second Defendant; xxix) clause 13.2 of the Recourse Dee d does not r efr r to termination; Jl6 xxx) the letter of 5th July 2017 appearing a t page 26 6 oi" the Plaintiffs bundle was written by the Second Defendant to Guarant Co Limited; a) without convening a noteholders meeting; b) without any request from or notice to noteholder; xxxi) she was not aware that Guarant Co Limited v_ras loss payee under the insurance 'With ATI nor of any no tice being given to ATI to make the noteholders the loss payees after the letter of 5 t h July 2017; xxxii) the Second Defendant never checked with the Virst Defendant to ensure whether it was paying the insurance premiums; xxxiii) on 26th June 2018 the Plaintiff asked the First Defendant to call in the Guarantee and shortly a fter the First Defendant informed the Plaintiff of cancellation of the Guara ntee, the exch ange appe.::1rs at page 284 and 286 of the Plaintiff's buncl le of documents; xxxiv)on 20th September 2018 the Pla intiff \vrote tn the Second Defendant notifying it of a ll the problem ::; a nd the Second Defendant responded, the excl1ange appears at p .293 and 295 of the Plaintiff's b1.m ci 1e of documents; Jl7 xxxv) the Second Defendant took action by writing to th e' h rst Defendant to clarify proof of which is a letter app<::;-tring at page 298 of the Plaintiff's bundle; xxxvi)as at September 2018 the Second and Fcurth Defendants were not aware of some of the issues r ,iised in Plaintiffs letter of 20th September 2018; xxxvii) the Plaintiff wrote another letter to the Second Defendant which was replied to on 8 th November 20 18 but without addressing the burning issues, the exchange appears at page 302 and 303 of the Plain tiffs bundle; xxxviii) on 6 th December 2018 the Plaintiff wrote to the Fourth Defendant but there is n o record of r espo nse before Court; xxxix)in paragraph 52 of her witness statement, it is ad rn i.tted that the Fourth Defend a n t h as obligations ,--i s a licensed exchange; xl) the Fourth Defendant h as issu ed b ond listing ruks to govern programmes but she is n ot sure whether they are meant to enhance investor p r otection; xli) the statement at paragraph 46 of h er witness sta tci-n ent was not truthful because its not all the parties I o the Jl8 Security Trust Deed that expres sed the in t e n ; ions alluded to by her in paragraph 46; xlii) on 23rd June 2017 the Second Defendant recei'F:~d a copy of the letter which the F irst Defendant \vn; I,::~ to Guarant Co Limited which letter appears at page '2i.) 7 of the Plaintiff's bundle of documents; xliii) she agreed that the notice at page 53 7 of the F<'irst Defendant's bundle was different from the letter a t page ~ 267 of the Plaintiff's bundle as one speaks of all noteholders while the other excludes the Plaintiff; xliv} the Second and Fourth Defendants beiieved that 21! ,1ote holders received notice of the redemption d espite 1.hem knowing that the plaintiff was based in Botswana. 3.12 Ms Mazyambe was re-examined by Captain Chooka a nd testified that the Programme Memorandum expressly stated that copies of documents which included the Security Trust Deed and Trust Deed were available for inspection by the Plaintiff upon request to the lead arranger or First Defend ant issuer. 3.13 Only the Second Defendant was the note trustee as Fourth Defendant was not party to the Trust Deed as constitu ting agreement; Jl9 3.14 Ms Mazyambe further testified in re-examination that: i) the Fourth Defendant did not check wheth er th e First Defendant used the Plaintiff's monies for the intended purpose as there was n o obligation to moni tor the activities of the First Defendant during the life of the Notes Programme, she relied on the t ext or the Programme Memorandum a t page 6 of th e F'irst Defendant's bundle, paragrap h two; ii) the procedure for enforcemen t of the Guarantee was that there had to be default by th e First De fen cl 2. 11 t m paying interest and the noteh older would ha,. (~ to instruct the Second Defendant to 1nake a claim on the Guarantee, she based this on clau se 6 . 1 at page 2 .') 0 of the Plaintiffs bundle and page 248 clau se 2. l(a) ; iii) the Security Trust Deed did not provide for n otehnlclers to directly instruct the Third Defendant to take enforcement action but instead to pass a resoluti nn to instruct the implementing p erson to instruc t the '1':1ird Defendant; iv) at page 266 of the Plaintiff's hundle is a letter from the Second Defendant to Guaran l Co r eferring to the ;,_. tter received from the First Defend ant on 15th June 201. 7 if intent to redeem the minority notes· ' . J20 v) the Programme Memorandum (at page 36 of the ? irst Defendant's bundle, clause 15.1 and 15.2) and Trust Deed (at page 22 of the Plaintiff's second supplem en i-ary bundle, clause 26.3 and 26.4) provided that no tices would be deemed given to noteholders if published 1n a Zambian newspaper; vi) they did not specify a mode of notice for note h o]d ers based outside Zambia; vii) the cancellation of the Guarantee did not recru. Jre a resolution of noteholders but could be done u n d er the Recourse Deed, clause 13.2 by notice from First Defendant without any furth er action by any party; viii) the Fourth Defendant does not oversee operations or the Second Defendant; and the Fourth Defendan t's r ol e was to approve the notes for list ing on its exchange; and ix) the Second Defenda nt is ,1 cleaning and settl c-:ment agency regulate.d separate ly by SEC and not by the Fourth Defendant. 4. ANALYSIS AND FINDINGS 4.1 Following the conclusion of trial on 9 1h September 202 0. the Plaintiff tendered final subm issions on 23 rd September '.?02 0 t o which the Second and Fourth Defenda n ts react<~cl -..vith J21 opposing submissions on 9 th October 2020. The se t. of submissions was completed by a reply from the Plain 1:i rr on 20th October 2020. 4.2 I propose to dispense with a cop10us reproduction or t he submissions of the parties for reasons which shall become apparent in my analysis b elow. 4 .3 After a close study and careful evaluation of the pleaclings, body of evidence and submissions, my decision is a s sel out hereunder. The contention of whether Second Defendan t breached the Guarantee by issuing the letter of 5 th July 201 7. 4.4 In Galaunia Farms Limited v Nationa l 1VIilling Co my:--any Limited (2004) ZRl at pages 9 -10 , the Supreme Court reaffirmed that the burden of pr oof of an allegation br::fore Court lies with the a lleger. 4 .5 In the case before Court, the Plaintiff pleaded as foll O\-vs m paragraph 27 and 28 of the amended staten1en t of cla im: supporting "27. On 5 July 2017, the 2 nd Defendan t w roL~ to 1 st Guarant Co Limited giw.rnntee cancellation of Defendant )s contrary to the sti pu la t io;is set out : ri t he Deed of Tranche Gua.ran t .. -.:e. Without- .. the Plaintifls consent or knowledge) the 2 11t1 De(e; /llant stated that all notes were being recleemecl except for the PlaintifPs Secured Notes ." the th.e and J22 "28. As a result of this breac h of contractua ; -~uty the Plaintiff has su[fered loss and damae;_f~ as the 2nd Defendant's a ctions h avz deprived t he Plaintiff of the benefit of the Deed of T rc.i_,.che Guarantee." (Emphas is added) 4.6 I h ave combed the Plain tiffs pleadings , evidence~ a nd submissions for an express provision or proh ibition u p on which the Plaintiff base s the aforesaid allega6on s and found none. In other words there is n o provision in the Guarnntee that forbade the Second Defe n dant to issue the lett<·r to Guarant Co. 4. 7 I the refore find that whilst the issu a nce o f the letter or 5 th July 2017 by the Second Defendant was not in furthera1 ice of the Plaintiffs interests, its m ere issu ance did not c ons titute a breach of the Guarantee . The contention of whether the letter of 5th J uly 20 l '7 h ad any effect on the cance llation proces s of t h e Guai-ant ee instituted by the First Defendant. 4 .8 In Bidvest Food Zambia Limited & 4 0 1·s v CAA I n1r,0 d & Export Limited2 th e Supreme Co u r t pron ounced as fr1 l! ows where there is express provision for te rmina lion of a wr:r.ten agr eement: 2 Appeal No. 04/201 8 at J 48 J23 "Where a provision for termination exists in the distributorship contract, the courts will u phold freedom of contract. Where in the present cos e, no contracts w ere existed, termination determinable by reas onable notice." (Emphasis aclclecl) clause the 4.9 In the case before Court, clause 13 of Gu arantee proviclt:d : "13. Expiry and Termination (a) This Tranche Guarantee shall exp fre on the earliest of: (i) by the Issu e,· the cancellation o{ this T,-ustee in Guarantee accordance w ith the R ecours e Deed; the date 011. which any amount or a ny payments due in term.s of the Fees Letter are outs tanding for more Uwn 30 day; and the date ending three (3) years fmm the date of this Tranche Guarantee. (ii) (iii) the Final Claim. Date). For the (in each case, avoidance of doubt, the terms of this Tranche Guarantee shall apply to a Notice of Default, and iss11 ed in any subsequent ancl related notice accordance with tha.l Notice of Defau li a nd pursuant to the terms of this Tra nche Gu.o ro n tee, which has been not1fi.e cl by the Trustee tn the Guarantor by 2pm on or prior to the Finctl Claim Date. (b) If the Guarantor becomes u ware th r:i it is unlawful in any applicable jurisclicU()n or contrary to any c~fficial sanctions to 1.1 ,f1 ir:h it may be subject to from time to time 1:1r £t to p erform any of its obligations u,1.~k1· this Tranche Guarantee, the Guarantor: (i) h ll s a promp tly not(fy the Tn,Lste(·_: (::· the same in writing; J24 (ii) shall, f or a pe1'i.ocl of no less tlw.11 20 Business Dcr.ys starting on the rlate of the notice clelivered under parCL[. J-'·r1p h (i) above, d iscuss the Tru stee in goo,:/. faith alternative nrrangemen.ts for con I u 1,1.ing to perform its obligations Hll lhout contravening any law or sane/ ion to which it may be sv bject or, 1f s u ch alten1ative not arrangements possible in t:h.e opin.ior1 of the Gu(,n. m tor supportin[! a ny (acting steps taken to replace th e Guarantor as the guarantor u nder th is Tranche Guarantee; and reos onably), a re (iii) may, in w 1y event, no less U 1r ;.u 20 Bus iness Days after delivery of the (i) notice delivered u ncler paragraph above by way of w ritten notice of the Trustee, immediately cancel, terminate and reduce to zero its nbligation.s 1.m der this Guar:-1.1 !1:ee ." (Emphas is Rddecl) Tranche 4 . 10 The Recourse Deed for its p art provided as fo llmvs 117 clause 13 .2: "Voluntary cancellation Subject to any agreeme nt betwee n the parties as to fees, if any, in resp ect of any cancellation of a. Tro:1che Guarantee, the COJ11P <!.'Ill~ !:la"l_J__give t he Gu c.1-c 1.tor not less than t_hirty (3 ()) . Business Day s, .. ~d or written notice of_J heir int~:mti on to pr·ocu-re t;1 a . t he Guarantor's liability u r~i-~'.f':..!~T r anche G1.1arc .·1j :e is reduced to zero. Upor!:... the ex µh-y_s !f· C:'.t is _ 30 Business Day period the_ G'-uaran-co -r's liab ili1-y_.:;;-:1all automatically be redu c ed to :::e,--o witho1 _;":_ __ a ny · ·. -·f -,," action further - (Emphasis adde d) c.,-.,. , _1.,, _ _ . :· ·.i:.:z· ' ·p, ~ -'-----,·~, reqt.l'_._t·cd - - J 25 4.11 It can be distilled from the foregoing tha t the First Derendant could effectively unilaterally cancel th e Gus ran tee b.v ._v;~y of notice to Guarant Co Limited. 4.12 Further, that upon expiry of 30 days from such n otir-c . t he liability under the Guarantee would be r ech.1.,.:ed to zero with out any further action by any par ty. 4.13 The record before Court shows that the Fir~-:t Defencl ..:1.n t gave Guarant Co Limited written notice on 23 rd June 201 7, a lbeit seeking an immediate cancellation . 4 . 14 By operation of clause 13(a)(i) or the Guarantee an.cl c!:1.use 13.2 of the Recourse Deed, the Guarantee ceased w h ave effect after the lapse of 30 d ays from date of the f irst Defendant's notice. 4.15 Further, by the same provisions there '\:vas n o effect tha t t he Second Defendant's letter of 5 t h July 2 01 7 h a d 01.· could h ave had as the cancellation automatically took effect ,vithout need for any further action from a n y party (th e ~-;ec:ond Defendant included). The contention of whether otherwise breached its duty t o the Plaint iff 2. f trustee. t he S e c o nd Defon <l.a nt ·· 1o te 4.16 According to the learned author:-: of S nell ' .s Princi·;-1£.c.; of Equity3 : 3 26t h Edition (1966) London: Sweet and Maxwell at page :~11;-:, J 26 "a trustee is guilty of a br,3ach of tn.1st if he r~i :S to do what his duty requires, or if he does whc ,~ :_:e is not entitled to do." (Emph asis a dd ed ) 4.17 In the case before Court the Plainriff has ta ken issue v.1ith the Second Defendant following th e delinquency of t11 i: :;-irst Defendant in honouring its payment obligations un cle; t he Note Programme and argued that as a result of the Second Defendant's breach of fiduciary c1 u ty, th.e Plc=iin tiff has l o[: '.· out on its principal investment of USDJ.2 ,500 ,000 and i.n t;-rest amounting to USD2, 108,698. 4.18 The Notes Subscription Agreeme nt entered into betwr.: en. the First Defendant and Plaintiff {the "Subscr iption Agre c·,1. ; :nt") expressly provided in clause 3 that their r elar.ionship O"/E-' !. the Note Programme was to be governed by the "Tr ansa•.·tion Agreements" defined in clause 1.2. 12 as the Programme Memorandum and the Subscription. Agn:cment w:u, its annexures. I reproduce clau::;;e 3 of the Subscr-i;nion Agreement for reference. "Sul!j!}__ct _ to the provis :t!;· ll. S o [ __i:_ie T r·a1;.:~::I: ;_li on Agreements, the Issuer ~u.:re by_g~t i·ees t o is::,! ··: the Norsad Notes and Norsad agrees to subsc ribe for -~uch notes on the Issue Date at Cl subscn'.ption price ~{ .l 00% (one hundred p ercent) of Lli.e n..ominol amount of the Norsad Notes. "4 (Emphasis added) · 4 Appearing at page 137 of the Plaintiffs primary bundle of d 0c11111ent ~. J27 4.19 The Programme Memorandum for its pa rt at page 7 expressly incorporated inter alia the Tru st Deed and stated that copies thereof were availabk for th e Pi a in tiff (a 11rl a ny other investor) upon written requ est to the Fin,t Defen cl ant. 4.20 I reproduce the relevant provision from page 45 of the Plaintiffs primary bundle of documen t s for rderence : "Documents Incorporated by Reference The following documents shall be d eerned incorporated Prospectus: ·::.o be for m. ___ p a r t or . this in, and t o 1. 2. 3. 4. 5. and Applicable supplements Pricing All Supplements to this Prospectus circulated b_11 the issuer from time to time: The audited annual fi11<"mcia.l s"lo.t.em.ents; a n d -'Wtes thereto, of the Issuer. n s w e ll as the approved audited annual financial state m.ents and notes thereto of the Issuer in respect. of fu rthe r fi.ncmcial years, as and when s uch become .-1.vcula.ble; The reporting account ·.':· repo11., ond n otes th e:·ef:o, of the Issu er, as well us the nppmved. reporting accountant's report m 1.d notes tl 1e rP.to of the h,suer in respect of further fin ancial y e ars, as and when such become cwailable: The Trust Deed, d a (e ,j__g_;--i o r _r:i:J .: o Ht this Pro~]!!;ctus, ma~i_.;; Detwc _:L'._!_ the Trustee, in rela ti.-.,, i to t1w / ,7c, tes: o.nr:,; -- -- The Age ncy Agreemeni cloted ;;·1 o,~ ab.out U1e elate of this Prospectus made be tween the Issuer ,m.d the Transfer Agent, Calculo :in!J and i'u_1_1i.ng Age1 1! . i::he ;_:·,:;-t.e of i:h.e l"s su. ;;· a nd - Save that any statemenl document which is dee m ed co be reference herein shall be deemed in ,.n a incorporaf.ed by ·,1101..li.:; ,,-cl or lJe '.~onta.in ed herein r))' - - ---- ·· ---- - - J 28 that a superseded for the p u rpos e o.f this Prospectus I o the such exte nt s tatement contained subsequent document which be incorporated by reference herein. modii.es or superDedes such earlier statem ent (whether express ly, by imphra.tion or otherwise). in any cleem e d t.o is The Issuer will, in connection. w i:th the regis tration nf the Notes with SEC, and if reqvirecl, under Applicable l✓aws, and the Bond Lis ting Rules, w here Listecl Notes o re in issue, publis h a new Prospectus or a .fi.tri.he r s upplement to the Prospectus on the occasion of u n.y su b:~er;uent issue of Notes , where there has been a. 111.n.terial o d 1Jerse change in the condition ljrna.nc:ial or otherwis e) :-,f the issuer which is not then rej7ected in ! he Prosped.11.s or any supple ment to the Prospectus or 011.y moclificution of the te rms of the Programme w hich w ould the n m CikP. the Prospectus inaccurate or misleading, or i.uhe re required by law that such a new Prospectus be so pu blis her? to _ ~ach The Issuer will pro vid e, 1.uill10ul ch arge, person to whom a copy o { the Prosr,:~ctus hu,_-L 1ee n delivered, upon the writt en reque$'t of s u c h !•.:L ·son, t o be a copy of any of the doc-rnn ents dee m e d such incorporated herein b y documents have been mocl(liecl or svpt·.r_c.;edecl. _f~~<tten requests for such docurn ,n Lts s h fYi!.lri.. b e d ire u.,: d to :;t Lhei r p r i_.-:·:i p al the Arrangers and/or th~-~1..~ gfficers set out herein." (Em ph r1.sis Hclckcl) rs fe r ence u nless 4.2 1 The Trust Deed for its par t irn p,)scd Ll w !'cl1m.v1 n g ,~.\: .iress duties on the Second Defe n dant in clnu se ') A: "9.4 Duties The Note Trustee Shall: 9. 4.1 Comply w ith its obligations un.der t:h is De, •,-..1.. the Te rms and Conditions . the [n.f err:re..-1.ii:or Agr, .-·ment c:,n~ under c:ny agreei/,,_,111 to 1di i(:. J-1 it ,:_s o }':u·t.y to zn its capacity a s trw.;i, ,,:-fc-r the Nui .-::holi-ler:::: J 29 9.4.2 act honestly and in goocl faith and comply with all applicable laws in pe1fo nning its obligations and in the exercise of its powers hereunder: 9.4.3 exercise such diligence and p rudence as a f)::>.rson acting as trustee in th e position of the Note Tru s tee would reasonably e .. -.:ercise its its ,i)r;wers obligations and hereunder; lhe exercise of in p e1fonn i1 itt in 9.4.4 if and to the extent lhe Note Trustee hotels any monies received by tl ,c Not e Trus tee in res; x:ct of the Notes (including 0 11y monies uihich re;-,r,0 sent principal or interest in respect of Not.es colled:c d by the Note Trustee pursuant to an Eve nt of Default), keep accounting records which correctly reco1·rl a nd explain all such amou nts received r;nd paicl hy the Note Trustee in its capacity a.s trustee unrf,::· this Trust Deed; and 9.4.5 if and to the extent the Note Truste e holds a ny monies received by the Note Trustee in re:s 1·,.=xt of the Notes rei ':·esent (includinq m onies 1Dmcn principal or interest in ,·espect of !V-'J f:es colle ,~tecl by the Note Trustee purs uant to w 1 E1Jent of r:ii~icLu.lt), keep any such monies sep arate fro m a !! other monies of the Note Trustee 1..uh.ich. are h.el, i in a capacity other than ns trus tee 1.1 w .ler thi,':- Trust Deed." 4 .22 However, the Trust Deed in cla-t.lS<:' ] 6 .1 9 s ti p 11lated t h,,t t he Second Defendant had n o obligat i(m to rn on irnr an d s1, 1 , · rvise the role players in the Note i>rngramm e (and w i:-i·1 no exception for the First Defendanl ). 4 .23 The said clause further stated tl ,; li. i11 th e ,JL~cnce o!· ;- ;tual knowledge to the contrary, the Sc:c'on cl D efen cl c.'.. nt was ,··:. iit1ed to assume that the role players ,-.,r. r f p~rfo n:1i n g /co1 :!: ;yi.ng J30 with their obligations. I r eproci uce th e exact \.:vor cl in; for reference: "The Note Trustee shall ru../t be und e , ,:U. JJL obL_ ;:__:ti on to monitor or supervise tl1!i!_,.[u.n ctions o/ any ~;t her person under the Notes or any other Trans .:::-:.~tion .:~h ose Docu ment, other obligations set out in n u.:se pre sen. f~ or cm _:, s u.ch Trans action Docu.men.t, and t:h.:-J N o°t'3 T,-~ustee s · . , :'I be entitled, in _the _absence :J o:ctua.. l !ciwwle d c· .; a~ breach of obligation, to ass-un--.. e ._;u ch person is properly perfo nni ng a nd comp lyinL~~- :JJith its obligations."5 (Empha s is added ) ·:-:he,::{; eacJ; res_p_ect than to in 4.24 Further, by clause 14.1.8 of i he Trust Deec1 , th ,· '.:;'irst Defendant was under obligatio n to inform th e ::,c,:-ond Defendant of any failure by the F :rst Defendant to hon.111 r its paym ent obligations under the Note Prograrnm r: . 4 .25 In the case before Court th er (' is n o rccnrcl of th , · i•irst Defenda nt informing the Secon d Defend ant u!· its de L _;_ 1 it in paym ent. 4 .26 Also, the r ecord shows th at <! c:.-;pit·e the !7 irst D el'( !,d a nt h a ving been in default as far b ;1-·k Rs Dccc rn ber 20 : .- . the Plaintiff only wrote to the Sr.cond Defcnrl.ant 011 2 0th September 2018 notifyin g it of the sam e (sec-· le tt er "·, \ pa ge 293 of the Plaintiffs prima ry bu n ,!lc of d ocur:1 c: 11ts) . 4.27 Additionally, whereas the Secon d l)('frnclc, nt \\,tS rnarn: ::, '. d to take action against the Fir st Dc-fe11ci;::J_n1 , includ :.-, ... for 5 Appearing a t p age 18-1 9 of the Plaintiffs s econ d s u pplt:11 11 ·!1 [;11\· b11i1d l< rii ,' oc u111e 11· .. J 31 enforcement of the covenant to pay, the import of clauses 8.1.2, 8.2.1 and 9.2 of the Trust Deed was that the Second Defendant could not do so on its own volition but instead required an express direction from the Plaintiff and/ or other note holders to do so. I reproduce the exact wording for reference: "8. 1.2 No Noteholder shall be entitled to take any act~on to enforce any right or rem_e_<l_y_ under or in respect of this Trust Deed or the obligation to repay the Notes or to pay intf:!rest thereon unless the Note Trustee, _ having become bound to take that action under Clause 9 (Powers and Duties of Note Trustee), fails to do so after _!Vithin reasonable notice and such failure shall be continuing. In that case any Noteholder may, upon giving an indemnity satisfactory to the Note Trustee, in the name of the Note Trustee (but not otherwise) and subject to sub-Clause 8.2, itself take the action the Note Trustee was bound to take to the same extent (but not further or otherwise) as the Note Trustee would have been entitled to do so. fourteen days ( 14) 8.2.1 Subiect to clause 9 (Powers and Duties of Note Trustee), the Note Trustee shall take action in relation to an Event of Default or to otherwise enforce this Trust Deed where all the following conditions are met: (a) that the Note Trustee has been directed to a talce in accordance with Noteholder(s) the Terms and Conditions, or the Terms and Conditions otherwise oblige it to act; and action by J32 (b) the Note Trustee is indemnified to its satisfaction against all reasonable Liabilities to which it may thereby render itself liable or which it may incur by so doing. 9.2 Powers in an Event of Default Subject to sub-Clause 8.2, the Note Trustee may at fl,...!!Y.._time upon becoming aware of the occurrence of an Event of Default and upon the direction of the relevant Noteholder(s): 9.2.1 issue and serve on the Issuer an Enforcement Notice (i) declaring all amounts payable under the Notes to be immediately due and repayable; and (ii) demanding that the issuer immediately repays the outstanding principal amount of the Notes (together with all accrued interest thereon as well as any other amounts outstanding due and payable under the Programme Documents); and 9.2.1 take such proceedings and/or other action as it may think fit against or in relation to the issuer to enforce payment by the Issuer of all such amounts Outstanding under the Notes in respect of which an Enforcement Notice has been issued Issuer. "6 (Emphasis added) served and the on i __ 4.28 The Programme Memorandum also echoes the mechanism of a directive by noteholder to the note trustee to remedy a default. I reproduce clause 11. 7 of the 'Terms and Conditions' thereunder at page 73 of the Plaintiff's primary bundle for reference: 6 See Plaintiffs second supplementary bundle at pages 10-12 J33 "If proceedings are initiated against the issuer, such that a person takes possession of the whole or material P?-rt of the undertaking or assets of the issuer, or an executzon or attachment or other process is levied, e-nf orced upon, sued out or put in force against the whole or a part of the undertaking or assets of the issuer and such is not discharged within 30 days, Upon the occurrence of such an Event or Default, then any holder of Senior Notes may, by written notice to the Note Trustee, direct that the Note Trustee issues a notice in writing to the Issuer directing that the issuer rectify the Event of Default. The Issuer shall, within 7 days of receipt of such notice or such additional time as the Note Trustee may grant in its sole discretion rectify the Event of Default." (Emphasis added) 4.29 There is no record of any such direction from the Plaintiff to the Second Defendant to take out enforcement action. 4.30 The Pla intiff having sat back for 9 months after the onset of default by the First Defendant and having neglected to direct the Second Defendant to act cannot now cry that the Second Defendant was negligent or otherwise in breach of duty as note trustee. 4.31 The Plaintiff cannot even hide behind ignorance _of the provisions of the Trust Deed which empowered it to direct the Second Defendant as it has already been shown that the Trust Deed was available for the Plaintiff to access on r equest to the First Defendant. J34 4.32 I have earlier in this judgment already discounted the relevance of the Second Defendant's letter of 5 th July 201 7 for purposes of the controversy between it and the Plaintiff. 4.33 Therefore, given the fact that: i) the Second Defendant was contractually exempt from monitoring and supervising the performance of role players; and ii) the Second Defendant was not presumed to have notice of non-performance and instead dependant on updates from the First Defendant and enforcement directives from the Plaintiff (and other noteholders); it cannot be said that the Second Defendant acted in breach of its duties under clause 9.4 of the Trust Deed or of its fiduciary duties in general but that instead the passive role of the Second Defendant was embedded in the weak contractual framework which did not inherently call for proactiveness. 4.34 Accordingly, whereas the Second Defendant was clearly less than useful in its role as note trustee, I reject the invitation to find that it transcended to a breach of fiduciary duties to the Plaintiff. J35 The contention of whether the Fourth Defendant acted in breach of statutory duty and / or duty of care to the Plaintiff. 4.35 The Plaintiff has taken issue with the Fourth Defendant for alleged failure to monitor the notes and keep the Plaintiff abreast with their viability (and that of the First Defendant issuer) despite the notes being listed on the Fourth Defendant's securities exchange. 4. 36 The Plaintiff has (in its submissions) also extensively quoted the provisions of the Debt Securities (Bond Listing) Rules in a bid to d emonstrate the existence and breach of statutory duty by the Fourth Defendant. 4 .37 I h ave studied the primary legislation being the Securities Act7 and note that section 81(1) provides as follows on continuing obligations post listing of securities. the value of "An issuer shall, once registered securities are liste4,~ eep the public informed of all matters which affftct securities immediat(!]y _ _:yp_on __ their becomi1]9__known to the 4trectors oi the issuer, by placing an advertisement in a newspaper of general circulation or in other media approved by the Commission and shall submit reports to the Commission and to the securities exchange on which those securities are listed." (Emphasis added) the 7 Act No. 41 of2016 J36 4.38 Quite clearly there is an obligation to keep the public (Plaintiff included) informed of all matters which may affect the value of the securities. 4.39 That obligation can be discharged by a public notice advertised in a newspaper of general circulation or other media approved by the statutory regulator (SEC). 4.40 However, that obligation is not borne by the Fourth Defendant as market operator but by the First Defendant as issuer of the Securities. The Plaintiff is thus barking up the wrong tree for this grievance. 4 .41 I must also add in passing that it would be unrealistic to expect the Fourth Defendant to monitor and report to each and every investor (or the multitudes of them) over the securities listed on its exchange, or let alone have capacity to do so. 4.42 As for the Debt Securities (Bond Listing) Rules, the Plaintiff has requested me to take judicial notice of their existence and effect. 4.43 Whilst the existence of the said Rules is beyond refute, the Securities Act, has the following instructive provision on legal effect in section 67 (2): "67 (1) Subject to the approval of the Commission, a securities exchange may make such rules as it J37 considers necessary or desirable for the proper and efficient regulation, operation, management and control of the securities exchange. (2) A ro.le of a securities exchange shall have no effect unles~ it has been approved, in writing, by the Commission." (Emphasis added) 4.44 Given the express provisions of section 67(2), the onus was on the Plaintiff as the party seeking to rely on the Rules to bring evidence of written SEC approval of the Rules instead of simply inviting this Court to take judicial notice of their effect. 4.45 Since the Plaintiff has not done so, I decline the invitation to speculate that they are binding and enforceable. 4.46 In any event the Programme Memorandum had the following express exclusions of liability on the part of the Fourth Defendant: "An application has been made to LuSE for the Issuer to list any tranche of Notes (Listed Notes) issued under the Programme, on the LuSE. LuSE assumes no responsibili!y_f_or the accuracy of the statements made_ or_ opinions _ or reports~ressed or referred to in this ProsE.ectus. Admission by LuSE to the Qfficial list of debt securities of Listed Notes issued under the Programme should not be taken as an indication of the merits of the Issuer or of the Listed Notes. "B responsibility "The SEC, and in the case of Listed Notes, LuSE, take no this Prospectus, any Applicable Pricing Supplements, or the annual reports of the issuer fas amended or contents of the for 8 Plaintiff's primary bundle of documents at page 42 J38 restated from time to time}, make no representation as to the accuracy or completeness of any of the foregoing documents and expressly disclaim any liability for any loss arising from or in reliance upon the whole or any parEJ _Q[_ this Prospectus, any !Jpplicable __ Pricing Supplements, or the annual reports for the Issuer (as amended or restated from time to time). that The directors of the issuer, having made all reasonable this Prospectus contains or enquires, confirm incorporates all information which is material in the context of the issue and the offering of Notes, that the information contained or incorporated in this Prospectus is true and accurate in all material respects and is not misleading, intentions the opmzons and expressed in this Prospectus are honestly held and that there are no other facts, the omission of which would make this Prospectus or any of such information or expression of any such opinions or intentions misleading in any material respect. that the This Prospectus is to be read and construed with any amendment or supplement thereto and in conjunction with any other documents which are deemed to be incorporated herein by reference (see the section of this Prospectus Incorporated by Reference") and, in relation to any tranche of Notes, should be read and construed together with the Applicable Pricing Supplement. This Prospectus shall be read and construed on the basis that s uch documents are incorporated into and form part of this Prospectus. "Documents headed the information Sponsoring Broker and other The Co-Arranger, professional advisers named he rein and the SEC LuSE ) - - - and the Registrar of Companies have not separately verified herein. contained represe~tation, wa;.,.anty or Accorg.ingly, no undertaking, express or implied, is made and no the Co-Arranger, responsibility Sponsoring Broker or other professional advisers named herein and the SEC, LuSE and the R egistrar of Companies as to the accuracy or completeness of the information contained in this Prospectus or any other information provided by the Issuer. The Co- is accepted by J39 Arranger, Sponsoring Broker and other Professional advisors named herein and the SEC, LuSE and the Registrar of Companies do not accept any liability in relation to the information contained in this Prospectus or any other information provided by the Issuer in connection with the Programme. "9 (Emphasis added) 4.4 7 I accordingly find that the Plaintiff's claim of the existence, and breach of statutory duty and / or duty of care by the Fourth Plaintiff is unsubstantiated. The contention of whether the Fourth Defendant was otherwise under statutory duty to the Plaintiff under section 99(2) and paragraph 4(b) of the Second Schedule to the Securities Act and acted in breach thereof. 4.48 Sec6on 99(2) of the Securities Act, provides: "Subject to section ninety-six, a securities exchange shall not own or operate a clearing and settlement agency, except that a securities exchange may have an interest in a clearing and settlement agency but its shareholding shall not exceed the prescribed percentage of voting rights." 4.49 Paragraph 4(b) of the second schedule to the Securities Act for its part is worded: "4. The applicant has made such provision as the Commission considers satisfactory for- (a) clearing and settlement of dealings in securities ties to ensure that performance of transaction effected on the 9 Ibid at page 43, second and fifth paragraphs J40 proposed exchange, and for the recording of such transactions; the effective monitoring and enforcement of (b) compliance with its rules and the provisions of this Act and the rules made under this Act;---" 4. 50 In the case of Anderson Mazoka & Ors v Levy Mwanawasa & Ors10 the Supreme Court guided as follows in terms of interpretation of legislative provisions - is law that trite "It the primary rule of interpretation i~ that words should be given their ordinary grammatical and natural meaning. It is only if there is ambiguity in the natural meaning of the words and the intention of the legislature cannot be ascertained from the words used by the legislature that recourse can be had the other principles of to interpretation ... " (Emphasis added) 4.51 Applying the aforesaid principles to section 99(2) of the Securities Act, it is clear that it delimits the relationship between a securities exchange and a clearing and settlement agency by: (i) barring the former from owning or operating the latter; and (ii) allowing the former to have only a limite d shareholding interest in the latter. 10 (2005) ZR 138 a t page 158- 159 J41 4.52 Paragraph 4(b) of the second schedule for its part simply lists one of the licensing requirements for a securities exchange as providing for an efficacious monitoring and enforcement mechanism in respect of compliance with its rules and the Securities Act. 4.53 Suffice to say that the two provisions say nothing of the relationship between the Fourth Defendant and investors in securities on its market but are instead centred on regulatory issues between the Fourth Defendant and the SEC. 4.54 Consequently, I find that the Fourth Defendant did not owe and breach any duty to the Plaintiff under section 99(2) and paragraph 4(b) of the second schedule of the Securities Act. The contention of whether there is cause for the Second Defendant's veil of incorporation to be lifted to make the Fourth Defendant liable for the Second Defendant's acts. 4 .55 In Madison Investment, Property and Advisory Company Limited v Peter Kanyinji 11 Malila, JS aptly guided that the two key considerations to be established by an applicant seeking to pierce the veil of incorporation are: 11 Selected Judgment No. 48 of2018 at p . J36-38 J42 • (i) that the veil of incorporation is being misused- a) to conceal the true state of affairs; b) to evade an existing obligation/restriction; c) for a fraudulent purpose; or d) for an improper purpose; and (ii) that there are no other conventional remedies available to the applicant instead of the drastic measure of lifting the veil of incorporation. 4.56 In the case before Court, the evidence has not shown that the Fourth Defendant was misusing the veil of incorporation between it and the Second Defendant. 4.57 Instead the uncontroverted evidence from Ms Mazyamba is that the Second Defendant is not controlled by the Fourth Defendant and that it is separately regulated by the SEC. 4.58 This is consistent with section 99(2) of the Securities Act which as alluded to bars the Fourth Defendant from operating a clearing and settlement agency. 4 .59 In any event, given the earlier findings in this judgment which have cleared the Second Defendant of liability to the Plaintiff, there is no basis upon which the question of piercing the veil can arise. J43 • 5. CONCLUSION AND ORDERS Claims 47.1, 47.3, 47.5 and 47.7 5.1 The aforesaid relate to the Second Defendant as per Plaintiffs amended pleadings. 5.2 The claims are however dismissed as there is no proven breach of contract and / or negligence on the part of the Second Defendant and instead the existence of a weak contractual framework that did not compel the Second Defendant to rise from passive to proactive. Claims 47.9 and 47.10 5.3 These claims fail as there was no proven negligence on the part of the Fourth Defendant nor statutory duty owed to the Plaintiff and breached by the Fourth Defendant. Claim 47.12 5.4 This cJaim is unsuccessful as there is no proof of misuse of the veil of incorporation by the Fourth Defendant and in any event no liability on the part of the Second Defendant for the question of piercing the veil to even arise. Claim 47.15 5.5 The interest claim was.« depend,Ut on an award in favour of the Plaintiff as against the Second and Fourth Defendants. It J44 • ... accordingly falls away in the absence of a trunk from which to branch. Claim 47.16 5.6 The circumstances of dismissal of the Plaintiffs claims against the Second and Fourth Defendants do not warrant any alternative relief against the two parties which have been cleared of liability. Claim 47.17 5. 7 The Plaintiff having failed in its case against the Second and Fourth Defendants should ordinarily bear the costs burden. 5.8 However, given the fact that: (i) the notes held by the Plaintiff on the Fourth Defendant's exchange market have not been redeemed; and (ii) there is no record of the Second Defendant ceasing to hold the office of note trustee; I will order that each of the Plaintiff, Second Defendant and Fourth Defendant bears their own costs of this action. 5.9 It is hoped that the spirit of reconciliation and goodwill can then prevail in their inevitable further engagement. Dated this -------- ------ , ________ d~ ------------~~---------- --------------- 2020 ~ .(w-- l~* K. CHENDA Judge of The High Court J45