United Nations Federal Credit Union v Dorah Namasiku Likukela (2014/HPC/0057) [2022] ZMHC 54 (13 July 2022)

2014/HPC/0057 ( AND DORAH NAMASIKU LIKUKELA DEFENDANT Before Lady Justice B. G. Shonga this 13o, day of July, 2022 For lhe Plain l1ff, Mr. M. Ndalamela, Messrs. Musa Dudhia & Co. JUDGMENT Cases Referred to: 1. Robert Simeza, Motel Enterprises Limited, Marianthy Noble, Yolande Hadjipetrou vs Elizabeth Mzyeche (2011) Vol3. Z. R 290. 2. Jazztel Plc vs. Revenue and Customs Commissioners {2017] EWHC 677 (Ch) . 3. Barclays Bank Ltd vs. W J Simms Sons & Cooke (Southern) Ltd and another [1979/ 3 All ER 522. 4. Ward v Wallis {1900] lQB 675 lJ Pag :-. 5. Attorney General v Seong San Company Ltd (2013) Z. R 372 (SC) 6. Annie Bailes v Charles Anthony Stacey and Anierica Simoes (1986) Z. R. 83 at page 87 7. Hussey v Palmer [1972] 3 ALL E. R. 744 8. Selangor United Rubber Estates v. Craddack (a bankrupt) and others (No 3) {1968] 2 All ER 1072 9. Chattock v. Muller [1878] (8 ChD 181) 10. Pallant v. Morgan [1952] 2 ALL ER 951 11. Nelson v Larholt {1947] 2 ALL ER 751 ( - 12. Bank of Cyprus v Menelaou [2015] UKSC 66 Legislation and Other Material Referred to: 1. High Court Act, Chapter 27 of the Laws of Zambia: S.13 1.0 BACKGROUND ( On 5 th February, 2014, the plaintiff instituted proceedings against the defendant by way of writ of summons, accompanied by a state ment of claim. In response, the defendant filed a defence and counterclaim on 20th February, 2014. 2.0 THE CLAIM By amended writ dated 5 th June, 2 014, the plaintiff claims repayment, by the defendant to the plaintiff, of the sum of USD ( 487 216.20 in respect of money allegedly paid to the defendant under a mistake of fact by the plaintiff. The plaintiff also claims: (i) an order for the defendant to account or to make restitution to the plaintiff of the sum of USD 487 216.20; (ii) a declaration that the assets purchased with monies erroneously paid to the defendant (the "properties") are subject to a constructive trust in favour of the plaintiff; (iii) a declaration that the beneficial interests of the plaintiff subsisting in the assets purchased by the defendant with the plaintiff's monies have priority over any interest that the defendant may have in them; (iv) a tracing order to recover the proceeds of the monies paid out of the defendant's accounts; (v) an order that the properties be delivered by the defendant to the plaintiff lo d eal with as owner thereof and all ancillary orders or directions as may be necessary to ensure that the constructive trust maybe enforced by the Court; (vi) interest on the sum of (, USO 487 216.20; and (vii) costs. 3.0 THE PLEADINGS 3.1 The Statement of Claim According to the statement of claim (the "statement"), the plaintiff is a credit union that provides, inter alia, banking and financial services to both serving and retired employees of the 3I Pvgc .. ( United Nations (The "UN"), who are its members. The statement identifies the defendant as a former employee of the UN who became a member of the plaintiff by virtue of her employment with the UN. It avers that defendant maintained h er membership even after she retired from employment, holding the following three bank accounts with the plaintiff: The Firs t Account, a membership savings account; the Second Account, also a membership s avings account; and the Third Account, a checking account. Alongside the above, the statement indicates that the defe ndant ceased to work for the UN in June, 2012 , albeit she was part of the July, 2013 UN payroll for purposes of payment of her terminal benefits. According to th e statement, whilst the defendant was a member of the plaintiff, s h e obtained three loans from the plaintiff. In addition to the loans, it is asserted that the defendant was extend ed a revolving line of credit through a VISA credit card ( tha t was issued to the d efendant by the plaintiff (the "Visa loan"). The statement goes on to specify that on 1s t August, 2013, an employee of the plaintiff erroneously transferred, to the d efendant's First Account, the amount of US$ 587 0 16.20 which was for payment of the UN p ayroll to UN employees. The error is said to have been d e tected on 13 th September, 2013, by which time the defendant had already spent or transferred a total of USDS 19,554.23. The statement avers that the plaintiff managed to claw b ack some funds by way of set off, leaving an outstanding balance of USD 487, 216.20, which the plaintiff now claims. 3.2 The Defence and Counterclaim In response to the lawsuit, the defendant filed a defence and counterclaim on 20th February, 2014. An amended defence was filed on 18th July, 2016. In it, the defendant accepts having been a member of the plaintiff. She counters that she remained a member up until 13th September, 2013. She denies having ceased to be a m ember of staff of the UN in June, 2012 and counters that she worked for the UN from 21st February, 2007, up to 30 th June, 2013, and was automatically on the July payroll for her terminal benefits. As for the loans, the defendant adn1.its having obtained the credit facilities, being 3 loans and a VISA credit card from the plaintiff. She d enies having authorised payment of her terminal b en efits through the plaintiff for purposes of clearing outstanding loans. Nonetheless, she contends that her outstanding indebtedness on all the credit facilities were cleared by August, 2013. ( , S I PiJgc With respect to the erroneous transfer, the defendant refutes the allegations and avers that the sum of USD587,016 was a genuine direct payment to her from her employer transferred from the UN Account at JPMorgan Chase Bank into her savings account with the plaintiff. That the said monies related to an injury compensation claim plus reimbursement of travel and medical expenses. As such, she contends that the plaintiff irregularly siphoned funds from her accounts. On these facts, the defendant counterclaims, inter alia, repayment of her injury compensation benefit entitlement profe ssed to compnse USD587,000 plus the sums of USD28,252, USD94,000, USD45,000, USDlS0,000, USD60,000, USDS,800, USD300,00, USD 100 million; damages for e motional anguish, humiliation and torture; interest on sums found due and costs. ( · 4.0 THE EVIDENCE The prosecution called one witness, Mr. James Lovino (PWl), the vice president of security and investigations in the employ of the plaintiff. Mr. Lovino's witness statement of 25th November, 2020, the plaintiff's bundle of documents dated 5th June 2017 ' and the plaintiff's supplementary bundles dated 3Qth April, ' 2020 were all tendered and admitted into Court as evidence. 6 I P ::. g e PW l 's testimony was that in June, 2007, the defendant was admitted to membership with the plaintiff. Subsequently, the defendant opened the First, Second and Third accounts with the plaintiff, after which she obtained three loans, namely; the debt consolidation loan of USD 48, 500.00, an auto Loan of USD 19, 500.00 and a signature loan amounting to USD 5 000.00. All three loans were to be serviced monthly. Additionally, the defendant was granted a VISA credit card, with it she had an outstanding balance of USD 8 785.73 as at 7 th July, 2013. PW 1 avowed that each loan agreement that governed the respective loans contained a section titled "Deduction from Final Entitlem ent" as evidenced by the documents at pages 24 ,35 and 42 of th e pla intiff's bundle of documents. I note that that the s ection r ead s a s follows: "Jn accordance with the applicable staff rules, I hereby authorize my employer to deduct from all or part of my final entitlements any funds that may be necessary to satisfy any loan and interest due to UNFCU in the e vent that I cease to be employed before such loan is paid in full ." PW 1 enlightens that the plaintiff reserved the right of off-set to collect outstanding loan payments from a members' funds held with the plaintiff where a member refuses or otherwise fails to pay off a loan. He referred me to item ''e" of the plaintiff's disclosures and agreements carried from page 46 to 71 of the plaintiff's bundles, particularly at p. 4 7. It reads as follows: "Right of offset. If you or any joint account owner owes us money for any reason (e.g. on a loan or on checks not yet paid), w e have the right to w ithhold that amount from your account before we allow you or any other owner to withdraw money. Each owner consents to the application of the full amount on deposit or any portion thereof to the payment of any indebtedness to us on the part of any owner ... " PWl went on to testify that on June 7th, 2013, the defendant wrote to the p laintiff indicating that she had requested the UN ( ' to pay her pension through her account held with the plaintiff, and giving express authority for the p laintiff to deduct arrears after receipt of the pension. She also indicated that her exit date a t the UN was 30 th June, 2012. The witness referred me to the e mail on p. 7 of the plaintiffs supplementary bundles. PW 1 moved to explain that every month, the UN would transfer funds from its bank account with JP Morgan Chase to the plaintiff and provide payroll instructions relating to the UN's ( . employees who are members of and maintain bank accounts with the plaintiff. In July, 2013, the plaintiff processed the UN payroll together with a payment of USD 28,256.30 relating to the defendant's terminal benefits. Reference was made to the email of Tuesday 30 th July, 2013, at p. 84 of the p l aintiffs bundles. PW 1 pointed out that the email referred to the defendant as separated from the UN. PWl further testified that on 13 th September, 2013, after a reconciliation exercise of their accounts, the plaintiff discovered 8j Pag e that US$ 587 428.65 was wrongly transferred to the defendant's first account. The erroneous transfer was made on 1 st August, 2013, when the plaintiff received a refund from UN in respect of the July pay-roll. The funds were incorrectly processed by an employee of the plaintiff and credited to the defendant's First account. PWl drew my attention to the funds transfer remittance advice on pages 89 to 90 of the plaintiff's bundle of documents. It reflects that the UN transferred the sum of US$ 587 428 .65 to the plaintiff in respect of refunds for the following: payment of USD 28,256.30 for settlement of the defendant's outstanding loan; payment of USD364, 010.39 for t he deduction for the end month pay group for the period 31/07/20 13; and payment of USD195, 161. 96 for the deduction for the end month pay group for the period 24/07/20 13. I was also referred to the defendant's statement of account for h er First Account for the period 1 st August to 31 st August, 2013. It reflects an inward transfer of US$ 587 428.65 ( from the UN to the d efendant for end July pay group. According to PWl the d efendant went on a spending expedition such that between 2 nd August, 2013 to 13th September, 2013, she had spent USD519, 554.23 as evidenced by the statement of account on page 93 to 98 and 100 of the plaintiff's bundle of document. It was PW l 's testimony that upon discovery of the error on 13 th September, 2013, the plaintiff promptly recovered USD94,000 and USD 5,800 by set off from the defend ant's g I P c1 g 2 ( ( . Second Account and First Accounts respectively, demonstrated by the statements at pages 107 and 112 of the plaintiff's bundle. PW 1 further drew the Court's attention to the copies of the registration documents and lands register printout at pages 1 through 6 of the plaintiffs supplementary bundle of documents. They show that the defendant purchased stand F / 441 a/ 50 / Q along Zambezi Road, a property from Nasla Builders and Development Limited using the money wrongly paid to her. PW 1 told the Court that he reached out to the defendant rega 1-ding the erroneous payment. Ultimately, PWl avowed that the defendant n ever reverted back and she has refused to pay back the money and hand over the assets that she acquired using the plaintiff's money. There being no cross-examination the plaintiff closed its case. At this stage the plaintiff asked that the defendant's counterclaim b e dismissed. Considering that the defendant elected to absent herself at the hearing despite having been in attendance when the trial date was set, I dismissed her counterclaim for want of prosecution. In doing so, I was cognisant of the caution given by the Supreme Court in the case of Robert Simeza, Motel Enterprises Limited, Marianthy Noble, Yolande Hadjipetrou vs Elizabeth Mzyeche (1) that: 10 I r a g e ( ( "There is no procedural injustice that is occasioned when a party who is aware of the proceedings does not turn up." 5.0 THE PLAINTIFF'S LEGAL ARGUMENTS In the skeleton arguments filed on 25 th November, 2020, the plaintiff submits tha t it seeks r estitution of USD 487 216. 20 mistakenly paid into the defendant's First account and an order that any property that was purchased with the said sum b e traced and d eclared to b e subject to a constructive trust in favour of the plaintiff. The p laintiff contends that the current position of the law on restitution can be discerned from the English case of Jazztel Plc us. Revenue and Customs Commissioners (2) where the Court stated as follows: "In s hort, in order to establish a prima facie claim to restitution of an enrichment all a claimant need show is that: 1. /\ t the lime the enrichme nt was confe rred, the claimant was rnis taken; and The mis take caused the e nrichment to be conferre d , the claimant was mis taken; and The mistake caused the enrichment to be confe rred (in the sense that, but for the mistake, the enrichm ent would not have been conferred)" ll. m. The p laintiff further posits that the princ iple which a pplies 1n this case is that where payment is made under a mista k e of fact ' the payee is prima facie entitled to r ecover it as money paid lll Pag r: " ( under a mistake of fact. The plaintiff drew my attention to the English case of Barclays Bank Ltd vs, W J Simms Sons & Cooke (Southern) Ltd and another (3) where the principle was first enunciated. In that case, the Court also pronounced that the claim to entitlement might be rebutted where: " a) the payer intends that the payee shall have the money at all events, whether the fact be true or false, or is deemed in law so to intend. b) the payment is made for good consideration, in particular if the money is paid to discharge, and does discharge, a debt owed to the payee; and c) where the payee has changed his position in good faith, or is deemed in law to have done so." As to the issue of change of position, the plaintiff illuminated the case of Ward v Wallis (4) where the English Courts explicated that change of position must be premised on bona fides on the part of the party who received the benefit of t h e payment in order to re but the entitlem ent by th e payer to repayment. Based ( on the cited cases the plaintiff a rgues that the plaintiff has d emonstrated that it made a payment under a mistake of fact and t h a t the defendant has not adduced any evidence to rebut its entitlement. Turning to the claim that a con structive trust was created the ' plaintiff c ited the case of Attorney General v Seong San Company Ltd (5) in which the Supreme Court upheld the principle that it 12 I Pi:!50. • (_ pronounced in the case of Annie Bailes v Charles Anthony Stacey and Anierica Simoes (6) where the Court stated: "Constructive trust is a creature of equity and may be imposed in order to satisfy the demands of justice and good conscience." Additionally, the Court illuminated the following remark made by Lord Denning in the English case of Hussey v Palmer (7): "By whatever name it is described, it is a trust imposed by law whenever justice and good conscience require it. .. It is an equitable remedy where the court can enable an aggrieved party to obtain restitution. " Ultimately, the Court alluded to the case of Selangor United Rubber Estates v Craddack (a bankrupt) and Others (8) and acknowledged that a constructive trust is birthed where a court of equity treats a person as a trustee by reason of their action, of which a complaint is made. In that case the Court elucidated ( that s uch a trust has the following distinguishing features: (a) that such trustees claim to act in their own right and not for beneficiaries, and (b) no trusteeship arises before, but only by reason of, the action complained of. Essentially, the plaintiff argues that the defendant's action of purchasing a property from funds which were clearly not m eant for her creates the right circumstances for this court to treat h er as a trustee by reason of her action, which the plaintiff h as 131 P a g e ( ( complained of. The plaintiff submits that it would be against good conscience to permit the defendant to retain the property. The law of equity, it is argued, would allow an aggrieved party to recover his property from any person into whose hands it can be traced. Aside the above, the plaintiff also quoted Sir Richard Malins V e, givingjudgment in the case of Chattock v. Muller (9), as follows: " ... , where the defendant has acquired the estate or part of it by a fraud on the plaintiff, I think that the court would be bound, if possible, to overcome all technical difficulties in order to defeat the unfair course of dealing of the defendant, and I should not, in my opinion, be going too far if I compelled the defendant to give the whole estate to the plaintiff at the price given for it, rather than that he s hould succeed in retaining it on account of any uncertainty as to the part which the plaintiff is e ntitled to have." Based on the Chattock case, as applied in the case of Pallant v. Morgan (10) , the plaintiff suggests that where property is wrongfully acquired and dispensed with, the Court should not h esitate to trace it regardless of the forms it may have since taken. The plaintiff goes on to propose that the right to recover property from any person in whose hands it can be traced is protected by law. To fortify its proposition, the plaintiff cited the case of Nelson v Larholt (11), where Denning J said, at p 752: 14 I P ,J g f "A man's money is property which is protected by law. It may exist in various forms, such as coins, Treasury notes, cash at bank, cheques, or bills of exchange, but, whatever its form, it is pro~ected according to one uniform principle. If it is taken from the n.ghtful owner, or, indeed, from the beneficial owner, without his aut~ori.ty, he can recover the amount from any person into whose hands it can ?e traced unless and until it reaches one who receives it in good faith and for value and without notice of the want of authority." 6.0 DETERMINATION ( I have carefully read the pleadings, ruminated on the law and critically analyzed the evidence before Court. Additionally, I h ave given ear and mind to the authorities presented for my consideration. U pan careful and critical analysis of the evidence before Court, it was with ease that I find, as a matter of fact, that the plaintiff erro neously transferred the sum of US$ 587 016.20 into the d efendant's first account. My finding is supported by the uncontested evidence of PW 1, supported by the Funds Transfer ( Remittance Advice contained at page 89 of the p laintiff's bundle of documents. The remittance advice distinctly shows that on 31 st July, 2013 JPMorgan Chase Bank transferred the sum of USD 587, 428.65 from the UNs account to the plaintiff's account broken down as follows: USD28,256.30 for settlement of outstanding loan in respect of the defendant, USD364,010.39 r elating to the deduction for the end month pay for the period 31 / 07/2013 and USD 195161. 96 relating to the deduction for the end month pay for the period 24 / 07/2013. 1s I P a g:.: In addition the defendant's statement of account for her First ' Account for the period 1 st August to 31 s t August, 2013, exhibited from p. 92 to 103 of the plaintiffs bundles, reflects an inward transfer of US$ 587 428.65 from the UN to the defendant on 1st August, 2013. The transaction narration states both the loan balance as well as deductions for end July pay group. From this, I am satisfied that the transfer of the entire amount of USD 587 428.65 instead of only the sum of USD28,256 .30 into the ( defendant's account was an evident error. My examination of the defendant's statement of account for her First Account for the period 1 st August, 2013 to 31 s t August, 2013 confirms that the defendant spent all but the sum of USD 487, 216.20 of the money erroneously paid into her account. More over, I accept as true the undisputed testimony of PWl, supported by the copies of the registration documents and lands register printout at pages 1 through 6 of the plaintiff's ( supplementary bundle of documents, that the defendant purchased stand F / 441 a/ 50 / Q along Zambezi Road, a property from Nasla Builders and Development Limited using the money wrongly paid to h er. Further, I take the view that the defendant knew or ought to have known that the money that she used did not r epresent her terminal benefits. I say so not only because of the transaction description on her account statement but ' beca use the evidence of PWl, supplemented by the statement of account and statement of earnings on pages 73, 82 and 83 of 16 I P a g 2 l ( the plaintiff's bundle of documents show that the defendant was entitled to terminal benefits in the sum of US$ 28,256.30, which benefits were paid on the 31 st of July, 2013. It is also clear to me that the defendant permitted the plaintiff to deduct any outstanding amounts due it from her terminal benefits. Therefore, I accept the plaintiff was entitled to use the terminal benefits paid to the defendant to offset against the defendant's outstanding loans. I base my finding on the terms of the loans alluded to by PWl, exhibited on pages 24, 35 and 42 of the plaintiff's bundles. Turning to the law, I accept, as did the Court in the case of Bank of Cyprus v Menelaou (12), that a claimant has a prima facie right to restitution if the following four elements are satisfied: (i) the d efe ndant has been enriched; ii) this enrichment is at the claima nt's expense; (iii) this enrichment at the claimant's expense is unjust; and (iv) there is no applicable bar or defence. In this case, I atn convinced that the defendant was enriched by the sum of USD 487,216.20, being the amount she spent from funds erroneously transferred to her. I also accept that the enrichment was at the plaintiff's expense because the money was intended to replace money already spent by the plaintiff to apply to the UN's July, 2013 payroll and to settle the defendant's indebtedness to the plaintiff on loans she had obtained. It cannot be disputed that the payment was unjust 17 I Pag e .. ( as the defendant failed to demonstrate that she had earned the money or was otherwise entitled to it. Lastly, no applicable bar or defence has been tendered by the defendant. Consequently, the plaintiff is successful in its claim for restitution. Accordingly, I order the defendant to make restitution to the plaintiff of the sum of USO 487 216.20 with interest, within 30 days of this Judgment. As regards the question of the creation of a constructive trust, I acknowledge that by virtue of section 13 of the High Court Act, Chapter 27 of the Laws of Zambia, this Court enjoys a mandate to a dminister the law and equity concurrently. That being the case, I opine that it is within my purview, as a court of equity, to apply the principle pronounced in the Selangor United Rubber Estates case, adopted by our Supreme court in Attorney General v Seang San Company, to treat a person as a trustee by reason of the ir action, of which a complaint has been made by the pla intiff. In this case, the d efendant used money erroneously paid to her to purchase property. What I must consider, therefore, is whether, by reason of an implied or resulting trust, the plain tiff is entitled to the property bought by the defendant. Recalling that the Supreme Court in the case of Attorney General v Seong San Company Ltd voiced that a constructive trust is a creature of equity and may be imposed in order to satisfy the demands of 18 I Page t 'It justice and good conscience, I am satisfied that the defendant conducted herself in a manner that it would be inequitable to permit her to deny that the plaintiff has a beneficial interest in the property that she acquired using their money. As a result, I consider that this is an appropriate case for me declare, as I now do, that: 1. the properties purchased with monies erroneously paid to ( the defendant are subject to a constructive trust in favour of the plaintiff; and ii. the beneficial interests of the plaintiff subsisting in the said properties have priority over any interest that the defendant may have in them. Persuaded by the reasoning of Lord Denning in Nelson v Larholt, I echo the proposition that property taken from the rightful owner, without a uthority can be recovered from any person into whose hands it can be traced. However, I must emphasize the condition that recovery is tenable only if the property has not reached one who receives it in good faith and for value and without notice of the want of authority. In light of the foregoing, I order that in the event that the defendant fails to make restitution within 30 days of this Judgment as directed, the plain tiff be at liberty to trace and recover the proceeds of the monies paid out of the defendant's accounts . In such 19 I Pug e eventuality, the defendant is directed to deliver the properties to the plaintiff to deal with as owner thereof. As for the claim for interest, I am aware that interest on foreign currency is generally low. I therefore award interest on the debt ofUSD 487 216.20 at the rate of2% per annum from l st August, 2013, when the money was erroneously transferred, until final payment. Costs are awarded in favour of the Applicant, to be taxed 1n default of agreement. Dated at Lusaka this 13th day of July, 2022. 20 I P c1 " ·, r, t:'.