Barclays Bank Zambia Plc v Eagle Trading International Limited and Ors (APPEAL NO. 25/2019) [2020] ZMCA 228 (31 January 2020)

IN THE COURT OF APPEAL OF ZAMBIA HOLDEN AT LUSAKA (Civil Jurisdiction) APPEAL NO. 25/2019 BETWEEN: Ui'6,:.~-tOFA~~~l '~1 BARCLAYS BANK ZAMBI'} t•; J l JAN tC?O ELLANT AND , ·--J • ~ f) CIV1Lt(~ 1 l ' ; , l~ r ,,,,.... .. . . ...-:-, I / - · ......__ _ _ I ~N,t,I I ' < EAGLE TRADING INTERNATIONAL .. LIMITED CLEVER SIAME MPOHA ESTHER CHANDA SAVENDA MANAGEMENT SERVICES LIMITED 18 T RESPONDENT 2 N D RESPONDENT 3RD RESPONDENT 4TH RESPONDENT CORAM: CHISANGA, JP, MAJULA AND NGULUBE, JJA. On 22nd May, 2019, 26th June, 2019 and 31 st January, 2020. For the Appellant: For the Respondent: Mr. R. Mwanza, Messrs Robert and Partners Mr. M. Sinyangwe, Messrs Willa Mutofwe and Associates JUDGMENT NGULUBE, JA delivered the Judgm ent of the Cou rt. Cases referred to: - 1. Doctor J. W. Billingsle y vs Mundi (1982) Z. R.11 2. Bank of Zambia vs Tembo and Others (1972) Z. Rl 72 3. Madison Finance Company Limited vs Sinyinza and Others, Appeal Number 38 of 4. Investrust Bank Plc vs Samuel Banda and Ford Benjamin Tembo, Supreme Court oJZambia, Appeal Number 198 of2015 5. Kasai Industries Limited vs International Banking Corporation Limited, Appeal No. 168/2009 J2 Legislation referred to: 1. The High Court Rules, Chapter 2 7 of the Laws of Zambia. 2. Law Reform (Miscellaneous Provisions) Act Chapter 74 of the Laws of Zamb ia 1. Introduction 1. 1 This is the appellant's appeal from a Ruling of Honourable Mrs. Justice B. G Shonga, High Court Judge, Commercial Division, that was delivered on 14th November, 2018 in which th e court found that interest had been settled by the respondent as the bank statements indicated that the status of the second respondent's loan account as at 11 th April, 2014 was that there was a nil balance. The court further found that there was no outstanding interest d ebited to the account pursuant to the facility letter and that there was no outstanding interest owing by the borrower. 2.0 The background to the dispute in this appeal 2.1 By a facility letter dated 3 rd July, 2009, the first respondent borrowed ZMW2 ,000 ,000,000.00 (Two Billion Zambian Kwacha) (unrebased) from the appellant to purchase stock. The parties agreed that the principal amount would be repaid in forty-eight monthly instalments of ZMW4 l ,666,666.67 J3 (unrebased), and that the first payment would be made on 31 st July, 2009. 2.2 The facility was secured by unlimited guarantee of the second and third respondents as well as a Third-Party Mortgage and a Third Party further charge under which the fourth respondent pledged stand number 11796, Kutlu Road, Lusaka, as security. The respondents defaulted in their obligations, resulting in the appellant making a formal demand on 13th January, 2011 for the amount of ZMW2 , 103,701 ,545.56 (unrebased), with accrued interest which would continue to accrue until the debt would be paid in full. 2 . 3 The appellant commenced an action by originating summons on 10th March , 2011 to recover the outstanding debt. On 13th July, 2011, the court entered Judgment in favour of the appellant in the sum of ZMWl ,5 16,000,000.00(unrebased) as at 7 th July, 2011 , and ordered that the said sum be paid in fifteen equal monthly instalments with interest as per the loan agreement. On 25 th January, 2017, the respondents filed ex parte summons for an order of stay of execution of the Judgment that was delivered on 13th July 2011, as well as an J4 application for the determination of interest payable on the Judgment sum pursuant to Order 3 Rule 2 of the High Court Rules, Chapter 27 of the Laws of Zambia. 2.4 The respondents contended that the Judgment sum had been paid in full and that the appellant had demanded interest payable on the Judgment sum in excess of ZMW580,000.00 (rebased) which the second respondent disputed and applied to the court for determination of the interest payable on the Judgment. The second respondent contended that the Judgment debt was satisfied in full on 11 th April, 2014, but when he wrote to the appellant to discharge the third-party mortgage on stand number 11796, Lusaka, it was not discharged. 2.5 The second respondent averred that the appellant demanded outstanding interest in excess of ZMW580,373.4 l {rebased) which did not reflect in the appellant's system. It then engaged a consultant to review the loan account with the appellant and the review report concluded that the second respondent had infact overpaid the applicant the sum of ZMW120,816.25 (rebased). The second respondent contended that the interest JS sought by the appellant is unconscionable, oppressive and should not be upheld. 2.6 The appellant's recoveries manager, one Beene Kaoma filed an affidavit in opposition and averred that it was not true that the Judgment sum had been paid in full and stated that the appellant demanded further interest in the sum of ZMW 625,748.55(rebased) which accrued in April, 2014 when the respondents paid the last balance on the principal, and prayed that the respondents' application be dismissed. The High Court considered the affidavit evidence before it, the skeleton arguments and the authorities cited and concluded that, the veracity of the respondents' bank statements had not been challenged. The court found that the 1st respondent's loan account stood at nil balance as at 11 th April, 2014 and remained as such as at 22nd June , 2 015, when the interim statement was issued. 2. 7 The court was of the view that the terms of the facility letter showed that interest was to be d ebited to the borrower's current account on a monthly basis, and that a statement reflecting a nil balance on the borrower's account meant that the interest J6 had been settled. The Court found that the statem ents spoke for them selves, that there was no outstanding interest on the respondent's account pursuant to t h e facility letter and that the respondents did not owe the appellant as they h a d fully settled th eir obligations. 3.0 Grounds of appeal to this Court 3 . 1 Being dissatisfied with the ruling of the High Court, the appellant appealed to this Court advancin g fou r grounds of appeal as follows- 1. "The court below erred in law and fact when it proceeded to deal with the application before it as an application to determine whether adjudged interest had been paid when the application before, it anchored on section 2 of the Judgment Act Cap 81 of the Laws of Zambia, was for determination of payable interest on the 13th July, 2011 Judgment." 2. The court below should have found the application for determination of payable interest on the 13t h July, 2011 Judgment res judicata as J7 the said Judgment had determined interest payable. 3. The court below erred in law and fact in determining there was no outstanding interest without paying any regard to the Judgment dated 13th July, 2011, the Judgment sum, interest awarded thereunder and amounts actually paid by the respondents granted the said Judgment had ordered interest to be paid at 3% per annum above the Base Rate then at 24% per annum as per facility letter dated 29th January, 2010. 4. The Court below erred in law and fact in placing reliance on and premising its decision establishing that there was no interest owing on scanty bank statements or any other document and construing a bank statement as a document that reflects judgment ordered interest as well as on the alleged failure by the appellant to debit the 1st respondent's account with interest. J8 4.0 The argument s presented by the parties and decision by the court. 4.1 The parties filed heads of argument which they relied upon at the hearing of the appeal. They also made verbal submissions to augment the said heads of argument. 4 .2 We have considered the arguments along with the judgment and Ruling of the High Court. In relation to ground one, the appellant contended that it is not in dispute that the respondent's application in the court below which gave rise to this appeal was couched as an application for determination of payable interest on the Judgment of 13th July, 2011. That it is also not in dispute that the said application was anchored on section 2 of the Judgment Act which provides for determination of payable interest. 4 .3 That the position taken by the court below in its ruling, that the application before it was for determining whether the adjudged interest had been paid was a departure from the application before it and was completely erroneous as the real application before it was one for determination of interest payable on the J9 judgmen t d a ted 13 t h July, 2 011. Section 2 of the Judgments Act provides as follows: "Every judgment, order, or decree of the High Court or of a subordinate court whereby any sum of money, or any costs, charges or expenses, is or are to be payable to any person shall carry interest as may be determined by the court which rate shall not exceed the current lending rate as determined by the Bank of Zambia from the time of entering up such judgment, order, or decree until the same shall be satisfied, and such interest may be levied under a writ of execution on such judgment, order, or decree." 4.4 It is the a p pellant's fu rth er argum en t that s ection 2 cited a bove was n ot en acted to e stablis h th e amount of inter est p ayable on a debt wh er e a J u d gm ent of court alrea dy d et ermined the inter est p ayable. It wa s su b mitted that the court b elow wa s restricted t o only deal with t h e actual application b efore it. To support this argumen t , t h e case of Doctor J. W. Billingsley v JlO Mundi 1 was cited. In this case the Suprem e Court held inter alia that- "Unless the parties have specifically and clearly applied for consent judgment, which they are at liberty to apply for at any stage of an action, the court should only deal with the particular application before it." 4.5 In relation to ground two , the appellant contended that there being no dispute that the judgment of 13 th July, 2011 determined the interest payable, the Court b elow should have procee ded to find any issue relating to interest payable res judicata. To support this contention, we were referred to the case of Bank of Zambia v Tembo and Others2 wherein the Suprem e Court h eld- "in order for a defence of res judicata to succeed, it is necessary to show not only that the cause of action was the same, but also that the plaintiff had an opportunity of recovering and but for his own fault might have recovered in the first action that which he seeks to recover in the second. A Jll plea of res judicata must show either an actual merger or that the same points had been actually decided between the same parties. Where the former judgment has been for the defendant, the conditions necessary to exclude the plaintiff are not less stringent." 4.6 In relation to ground three, it was contended that it is odd that the Court below did not consider adverting to the Judgment of 13th July, 20 11 in resolving the dispute before it. More odd also, that the Judge was alerted that the Judgment had awarded interest as the loan agreement. To demonstrate how the interest awarded was in line with Supreme Court decisions, the court was referred to the case of Madison Finance Company Limited v Phillip Sinyinza & Others3 where it was held that- "as regards the 3 rd respondent, we find that he is liable to pay the sum of KS0,000,00 being the principal sum advanced to the 1 st respondent plus interest at the agreed rate as adjudged by the Court because the 3 rd respondent defaulted or failed to pay this sum so endorsed in the J12 guarantee document executed in favour of the applicant which the 3 rd respondent must pay. We replace it with the sum of KS0,000.00 plus 2.5% percent interest per annum as agreed in respect of the 1 st and 3 rd respondents." 4 .7 With respect to ground four of the appeal, it was the appellant's contention that the court below erred in law and in fact when it relied on scanty bank documents and construed the bank statements as documents that reflect or should reflect judgment ordered interest. It was submitted that the bank statements relied on by the lower Court cannot in any way imply that the respondents had fully paid interest let alone costs to fully satisfy the judgment sum to warrant discharge of the Third-Party mortgage on stand number 11 796, Lusaka. 4.8 The appellant contended that in accordance with the Banking and Financial Services (Classification and Provisioning of Loans) Regulations, 1996, banks are compelled to stop charging interest on inactive bank accounts like the respondents' and only recover the principal amount first and collect outstanding J13 interest thereafter. Section 8 and 9 of the said Statutory Instrumen t provide as follows- 8 Where a loan is placed in non-accni.al status under these Regulations- (a) all previously accni.ed but uncollected interest taken into income shall be reversed, at the latest, by the end of the quarter in which the loan was placed in non-accni.al status; (b) interest which has accni.ed during a current quarter shall be reversed against the income of that quarter; and (c) interest accni.ed in periods other than the current quarter shall be charged to the Allowance for Loan Losses Account. 9 (1) Where a loan is placed in non-accni.al status, any cash payments received shall first be applied to reduce the amount of the principal outstanding and due. (2) Where the principal outstanding of the loan which is due has been fully recovered, any further excess payments may be taken into income, J14 provided the amount of income recognised is limited to the amount which would have been due to the bank or the financial institution if the loan had been current at its contractual rate. 4.9 The appellant explained that this was the reason the loan and current accounts will not have any interest debits. That interest, however, continues to accrue and is manually calculated where there is no judgment and even more so where there is judgment as in this case. That the respondent cannot wish away unpaid interest and costs just like that and hope to have the mortgaged property discharged without proving full payment. In summation, the appellant urged this Court to set aside the Ruling of the Court below as it had demonstrated that the respondent is yet to settle the interest accrued on the judgment sum in the amount of ZMW 6 4 5,000.00 (re based) not to mention the costs whose non-payment has not b een challenged. 4.10 Responding to the arguments under ground one, the respondents contended that the issue for determination before the court b elow was whether the interest payable on the judgment, being contractual interest had been paid to satisfy JlS the judgment debt in full. There was no consideration and or submissions by both parties on the type of interest that was awarded by the Court below. The issue as the Court saw it, was the dispute of whether the a djudged interest had been paid. 4.11 Responding to ground two, it was contended that it is not in dispute that the interest that was to be paid on the adjudged amount was determined by the Court in the said judgment, that is, contractual interest. However, a dispute arose between the parties as to whether the same had b een paid by the respondents. As such, the respondents applied to the Court for determination of the interest payable. It was contended that the matter cannot be said to be res judicata and could only have been resolved by the Court that gave the judgment. 4. 12 Responding to grounds three and four, the gist of the respondents' submissions was that the judgment of 13th July, 2011 does not need any interpretation as it clearly states what form of interest was payable to the appellant contrary to the appellant's contention that there is judgment interest to be paid. To the respondents, the application which was before the lower court for d etermination was whether the interest J16 adjudged on 13th July, 2011 had been fully paid by the respondent and not for determination of the interest payable. It was the respondents' further submission that the court did not award any judgment interest in line with section 4 of the Law Reform (Miscellaneous Provisions) Act2 in the judgment dated 13th July, 2011 and that the appellant cannot now turn and seek judgment interest which was not awarded. 4.13 At the hearing, Counsel for the appellant relied on the filed amended heads of argument and reserved the right to reply. On the other hand, Counsel for the respondents also placed reliance on the respondents' head of arguments. Mr. Sinyangwe submitted that the issue for determination before this court is whether the interest on the Judgment of the lower court was paid and submitted that the same was paid. 4.14 In reply Mr. Mwanza, Counsel for the appellant filed heads of argument in reply. The gist of the said arguments was that the import of section 2 of the Judgment Act on which the respondent relied cannot be ignored and that the real issue which was befor e the Court below was for determination of interest payable which stands res judicata. J17 4.15 We h ave con sidered the J udgment of the lower court, the submissions by counsel and the r ecord of a ppeal. The is sue s that call for determination are- ( 1) Whether the application 1n the lower court was for d etermination of payable interest as per the 13 th July, 2011 Judgment. (2) Whether the a pplication for d etermination of payable interest in relation to the 13 th July, 2011 Judgment was res judicata. (3) Whether the court err ed when it r elied on scanty bank statements in d eciding that there was no interest owing as well as on the alleged failure by the appellant to d ebit the 1st respondent's account with interest. 4. 16 Ground one and two will be determined together a s they are interrelated. In our view, the starting point in this appeal is the Judgment of the High Court that was d elivered on 13th July, 2011, which found the r espondents indebted to the appellant in the sum ofKl,51 6, 000,000=00 as at 7 th July, 2011, the amount which was to b e paid in fifteen equal monthly instalments with interest as p er the loan agreemen t. The court further h eld that .. J18 in the event of default of any single instalment, the appellant would be at liberty to foreclose , take possession and delivery up of the mortgage property, stand number 11 796, Lusaka and have power of sale. 4.17 On 23rd February, 2017 the 2 n d respondent filed an application in the High Court, Commercial Division, for an order to determine interest payable on the Judgment dated 13th July, 201 1. The affidavit in support of the application that was sworn by Emmanuel Mainza Millapo , a manager in the 2 nd respondent indicated at paragraph 6 of the affidavit that the Judgment debt in the sum of ZMWl,516,000 ,000 had since b een paid in full, with interest as agreed in t he loan agreement. 4.18 The 2 nd respondent's manager further averred that upon the 2 nd r espondent satisfying the Judgment debt in full on 11 th April, 2014, a letter was written to the a ppellant to discharge the third-party mortgage on stand number 11796, Lusaka, but this was not done. The appellant demanded outstanding interest from the 2 nd respondent in excess ofZMW580,373.41 which was not r eflecting in the a ppella nt's system. The 2 nd respondent disputed owing the a ppellant any interest and en gaged a J19 consultant to review its loan account h eld and maintained by the appellant. The consultant produced a review report which concluded that the 2 nd r esp ondent overpaid the appellant a sum of ZMW120 , 816.25. the 2 nd respondent's manger averred that the appellant's demand for interest 1n excess of ZMW580 ,373.41 is oppressive and inconsiderate and disputed the same. 4.19 From the affidavit in support, it is clear that the issue before the court below was whether interest was paid. The appellant demanded to b e paid interest in excess of ZMW580,373.41 whereas the respondent contended that the interest had been paid in full, and further presented a review report rendered by the consultant that they engaged who concluded that the respondents h ad overpaid the appellant by abou t ZMW120, 816.25. We are of the view that the court had jurisdiction to hear the application b efore it, which was to d etermine whether interest had been paid. Although the summons were 'for determination of interest)' the affidavit in support disclosed that the issue brought before the court con cerned liquidation of the J20 interest ordered in the Judgment of the court handed down on 13th July 2011. 4.20 The appellant responded to the respondents' assertion that interest had been fully liquidated. The issue raised by the application before the court was whether interest as ordered had in fact b een liquidated. Despite the wrong h eading, the court proceeded to d etermine th e real controversy arising in the application. The matter cannot therefore b e said to be res judicata as it was not for determination of payable interest as per the 13 t h July , 20 11 Judgmen t, but was for determination whether interest was in fact paid. As such, we do not find m erit in grounds one and two of the a ppeal and they accordingly fail. 4.21 Grounds three and four relate to whether the court erred in determining that there was no outstanding inter est and whether, the court erred in relying on scanty bank statements in deciding whether there was interest owing. Since the two grounds are r elated, th ey will be considered together. 4 .22 In determining wheth er there was outstanding interest, the court should h ave analysed the Judgment dated 13th July, J21 2011, the Judgment sum, the interest awarded as well as the amounts which were paid by the respondents . The Judgment of 13th July, 2011, exhibited on pages 85 and 86 of the record of appeal indicates what interest was payable by the respondents on the Judgment sum, ZMWl,516 ,000.00 which was p ayable in fifteen equal monthly instalments with interest as per the loan agreement. 4.23 In the case of Investrust Bank Pie vs Samuel Banda and Ford Benjamin Tembo4 , the court entered Judgment in favour of the appellants against the 1st respondent in the sum of ZMW1 39,911.23, being principal sum and interest outstanding. The said sum attracted contractual interest as agreed in the facility letter up to date of final payment. 4.24 We agree with the a rgument that the respondents did not demonstrate how much interest they paid under the Judgment as well as when and how the interest was paid. The court did not analyse the facility letter , the bank statements and other necessary documents on record prior to concluding that the respondents did not owe the a ppellant any outstanding interest. . . . .. J22 4.25 The agreem ent on p age 26 of t he record of appeal indicates that interest on the term loan facility would be charged at 3% per annum above base rate and that interest payable under the facility letter shall- (a) Be based on the cleared daily balances; (b)Be calculated on the basis of a 365 day year; (c) Accrued from d ay to day; (d)Be debited to the borrower's current account monthly 1n arrears ; and (e) In event of it n ot being punctually paid, b e compounded monthly. In the case of Kasai Industries Limited vs International Banking Corporation Limited5 , where on similar issues of uns upporte d debt liquidation claim, the Supreme Court surmised: "it is our view, therefore, that the evidence on record does not support the Appellant's claim that the loan account in issue w as paid and settled." "Quite clearly, the claim that the overdraft amount was paid and settled was made by the Appellant. It is, therefore, our view that, going by the principle that" "he who alleges must prove," the onus was on . . J23 the Appellant to produce evidence before the trial Court to show proof of settlement of the amount s which w ere being claimed by t he Respondent." 4 .26 It is clear that the trial court placed reliance on scanty bank statements in concluding that the 1st r espondent's loan account stood at nil balance as a t 11 th April, 2014 and remained as such balance as at 27th June, 2015 when the interim statement "EMM 4" was issued. We are of the view that the respondents d id not demonstrate the payments that were m a de towards the liquidation of the Judgment sum and interest. The bank statements "EMM2", EMM3 and "EMM4" do not show that t h ere was no interest payable by the respondents or that they h ad settled the Judgment ordered interest. 4 .27 We are therefore of the view t h at the court misdirected itself when it conclu ded that t he respondents did not owe the appellant any outstanding interest. For the reasons given above, we reverse and set aside the lower court's Ruling t h at there was no outstanding interest owed by the respondents. 4 .28 We hereby send the matter b ack to the High Court for assessment of interest as awarded by the court on 13th July . - J24 2011 by the Registrar. Costs shall abide the outcome of the said assessment. F. M . CHISANGA JUDGE PRESIDENT - COURT OF APPEAL COURT OF APPEAL JUDGE P. C. M . NGULUBE COURT OF APPEAL JUDGE