Bonanza Cash Express Limited v Dylan Chifita (2020/HPC/0713) [2020] ZMHC 419 (29 October 2020)

IN THE HIGH COURT FOR ZAMBIA AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) 2020/HPC/0713 IN THE MATTER OF: Order 30 Rule 14 of the High Court Rules, Chapter 27 of the Laws of Zambia and Order 88 Rule 1 of the Rules of the Supreme Court of England 1965, in the White Book 1999 Editiou IN THE MATTER OF: A Loan Agreement Dated 7 th January 2019 IN THE MATTER OF: Stand No. 20, Block 65, George Improvement Area, Lusaka BETWEEN: BONANZA CASH EXPRESS LIMITED APPLICANT AND 2 9 OCT 2020 DYLAN CHIFITA RESPONDENT Before the Honourable Mr Justice K . Chenda in Chambers on 29th October 2020 For the Applicant For the Respondents : Mrs D. Findlay or D. Findlay & Associates : Mr B. Zulu or OMM Banda & Company ,,... r f JUDGMENT Legislation: (i) (ii) The Money-Lenders Act Chapter 398 of the Laws of Zambia in s. 10 and 15 The Lands and Deeds Registry Act Chapter 185 of the Laws of Zambia, in s.4(1) and 5(2)(a) (iii) The Movable Property (Security Interest) Act No. 3 of 2016, in s .2(1) and 36(1) '1 Case Law: (iv) Jidthiopian Airlines Limited v Sunbird Safaris Ltd & Ors (2007) ZR 235 at p.241 {v) Pandoliker and Sons Limited & Others v African Banking Corporation Zambia Limited- Appeal No. 231/2013 at J20 - 21 (vi) Kasabi Industries Limited v Intermarket Banking Corporation Limited-Appeal No. 168/2009 at p. J24-25 (vii) Neighbours City Estates Limited v Mark Mi:..--:-:hili Appeal No. 47 /2013 at Jl3-14 INTRODUCTION AND BACKGROUND 1.1 The Applicant, as a duly licensed money lender, commenced this action by originating summons for debt (♦ recovery against its customer (the Respondent). 1.2 The Applicant's case was supported by a primary affidavit filed on 11 th September 2020 and an affidavit in reply on 13th October 2020 following the Respondents' affidavit in opposition dated 29th September 2020. 1.3 The Applicant also filed written argun{ents on 11 th September 2020, whilst the Respondents tendered their written arguments on 29th September 2020. 1.4 The set of arguments was completed with a reply from the Applicants on 13th October 2020. J2 1.5 At the substantive hearing on 14th October 2020 Counsel for both parties substantially relied on the documents filed, supplemented with brief and concise viva voce submissions. After a careful consideration thereof, my decision is as set out below. FACTS, EVIDENCE AND ISSUES 2.1 The following facts set out m the Applicant's affidavit evidence and confirmed by the Respondent's opposing affidavit and supporting documents 1 are common cause - (i) the Applicant and Respondent entered into an initial loan agreement dated 26th October 2018 (the "First Loan Agreement") for a disbursed term loan of K26 l ,800 payable: a) in 2 instalments commencing 26th November 2018 up to 26th December 2018; and b) with interest in the total sum of K6 l,500 (given a total repayment sum of K323,300, broken down as approximately K161,650 per month); (ii) the Applicant and Respondent later entered into a second loan agreement on 7 th January 2019 (the "Second Loan Agreement"); 1 In Ethiopian Airlines Limited v Sunbird Safaris Ltd & Ors (2007) ZR 235 at p.241 the Supreme Court pronounced that any facts not rebutted by an opposing affidavit are deemed admitted. J3 (iii) the Second Loan Agreement was as a result of the Respondent's inability to make full payment under the First Loan Agreement and the exposure was restructured into a term loan of K320,000 payable: a) in 12 instalments commencing 7 th February 2019 up to 7th February 2020; and b) with interest in the total sum of K307 ,200 (given a total repayment sum of K627,200, broken down as approximately K52,267 per month); (iv) the Applicant and Respondent also agreed under the Second Loan Agreement that the collateral for the term loan would be: a) plot no. 20 block 65, George Compound, Lusaka (the "Leasehold Property"); and b) Mitsubishi Rosa registration no. ACM3417 and Toyota Hiace registration no. BAG6843 (the "Motor Vehicles"). 2.2 The Applicant initially alleged that the Respondent "t defaulted on the Restructured Loan Agreement and only paid K60,000 as follows- (i) KIS,000 on or about 1st July 2019; (ii) K20, 000 on or about I 7th July 2019; and (iii) K25,000 on or about 30th July 2019. as a result of which the loan balance had ba Uooned to K839,456 as at 12th August 2020. J4 2.3 The Respondent for his part disputes the Applicant's cause of action and right to relief counter averring that - (i) the amount paid by the Responden~ is more than alleged, based on the following additional receipted payments: a) K8,650 on 7th September 2018; b) Kl6,000 on 14th September 2018; c) K18,999 on 18th September 2018; d) K2,200 on 11 th October 2018; e) Kl4,800 on 20th October 2018; f) K79,500 on 23rd October 2018; g) K14,800 on 19th November 2018; h) K20,100 on 30th November 2018; i) K32,000 on 1st December 2018; j) K3, 100 on 9th May 2019; k) KS,960 on 29th May 2019; 1) K40,000 on 13th August 2019; and t( t m) K20,000 on 16th July 2020. (ii) the term loan of K320,000 under the Second Loan Agreement is wrong as it is based on an illegal rate of interest applied to the balance on the loan under the First Loan Agreement contrary to the Money-Lenders Act2 and an illegal rate of interest under the Second Loan Agreement for the same reason; and 2 Chapter 398 of the Laws of Zambia JS (iii) the amount of K839,456 as at 12th August 2020 is incorrect as the Respondent's loan balance stood at about K380,000 by then. 2.4 The Applicant accepted in reply that there was a payment of K20,000 receipted to the Respondent on 16th July 2020 but counter alleged that; (i) (ii) (iii) the rest of the payments allegedly made by the Respondent do not relate the Second Loan Agreement but to the First Loan Agreement and prior transactions between the Applicant and Respondent; to total amount paid under the Second Loan the Agreement was K80,000; and the interest rate charged by the Applicant was as agreed and the Respondent has queried it as an afterthought to try and escape its commitment to pay the Applicant. ( . · 2.5 The issues for determination as I see them therefore are: ( t the Second Loan Agreement based on the validity of (i) can the Respondent challenge the loan sum under the provisions of the interest under the First Loan Agreement; (ii) how much has the Respondent paid the Applicant under the Second Loan Agreement; (iii) is the interest rate under the Second Loan Agreement permissible at law; and (iv) is the Applicant entitled to any of the reliefs claimed. J6 ANALYSIS AND FINDINGS The Contention of the Loan Sum under the Second Loan Agreement 3.1 In paragraph 7 of the affidavit in support of originating summons the Applicant avers that at the Respondent's request, the balance under the First Loan Agreement was restructured culminating into the loan sum of K320,000 under the Second Loan Agreement. 3.2 The said restructuring is admitted by the Respondent in paragraph 12 of his opposing affidavit. 3 .3 In Pandoliker and Sons Limited & Others v African Banking Corporation Zambia Limited3 the Supreme Court guided as follows in a scenario where there is a restructure of a loan facility and there is a subsequent Court action on that restructured facility: "In our view, by deciding to restructure the loan facility through the banking facility letter of 2 8th September 2011 , the parties re_~efined their relationship so that reference to the old order had henceforth become impetinent. ( . I • 3 Appeal No. 23 1/ 2013 J7 ,. ·• It is the ref ore not surprising that the affidavit in support of originating summons in the Court below showed that the legal mortgage rights that the respondent sought to enforce emanated and were referable to the banking facility letter of 28th September 2011 In this regard, we accept the submission by the learned counsel for the respondent to the extent that the parties redefined their relationship through the new banking facility letter of 28th September 2011, any defaults and breaches under the previous relationship could not be part of the new credit affair that started with the 28th September 2011 banking facility letter Even assuming that the appellants had adduced sufficient evidence to show that their counterclaim was well founded to raise a defence, the perceived breaches of the respondent's pre-restructured facility in an action premised on the post structured in our view be anachronistic. 4 " (Emphasis added) facility. would 3.4 I therefore find that the Respondent is precluded from impugning the loan sum of K320,000 under the Second Loan Agreement on the basis of the validity or otherwise of the First Loan Agreement, or any of its provisions. 4 Ibid,. J20 - 21 JS The Contention of Amount Paid Under th('I Second Loan Agreement 3. 5 In Kasabi Industries Limited v Intermarket Banking Corporation Limiteds the Supreme Court settled the position that where in a debt recovery action, the alleged debtor claims that it does not owe on account of the debt having been paid, the burden is on the alleged debtor to substantiate its claim through evidence of payment and I reproduce the relevant parts of the judgment: therefore, our view It, however, denied owing "According to the evidence on record in this case, the Appellant did not dispute its indebtedness to the Respondent with regard to the loan i n issue in the Court below. the overdraft amount claimed by the Respondent on grounds that it was paid and settled. Quite clearly, the claim that the overdraft amount was paid and settled was made by the Appellant. It is, that, going by the principle that "he who alleges must prove", the onus was on the Appellant to produce evidence before the trial Court to show proof of settlement of the amounts which were being ciairned by the Respondent. The Appellant failed to discharge its . evidential burden and instead relied on exhibit "MB (ii)" which in essence shows that the Appellant owes the Respondent the sum of K77,670,890.12 on its current account. s Appeal No. 168/2009 J9 •• We, therefore, reject the Appellant's argument that the trial Judge shifted the burden of proof onto the Appellant to prove the loans, securities and balances involved in this matter. We find no merit in the fifth ground (e) and dismiss it."6 (Emphasis added) 3.6 In the case before Court, the Applicant had at commencement alluded to having only received three payments from the Respondent over the Second Loan Agreement to the total of K60,000 (on 1 st, 17th and 30th July 2019 - see paragraph 11 of affidavit of 11 th September 2020). 3.7 The Respondent has accepted the correctness of those payments but averred in paragraph 11 of his affidavit of 29th September 2020 that there were additional payments evidenced by receipts collectively produced as "DC l". 3.8 I have studied those receipts and have discarded all of them that predate the Second Loan Agreement. I have instead accepted the following which came after the creation of the Second Loan Agreement: a) K3,100 on 9th May 2019; b) KS,960 on 29th May 2019; c) K40,000 on 13th August 2019; and 6 Ibid,. p. J24-25 JlO d) K20,000 on 16th July 2020. 3 . 9 I therefore find as a fact that in addition to the K60, 000 admitted by the Applicant, the Respondent had paid a further K69,060 under the Second Loan Agreement giving a total of K129,060. 3.10 Effectively therefore, I also find that the Respondent is in default under the Second Loan Agreement (given the agreed 12 month term of repayment). The Contention of the Interest Rate Under the Second Loan Agreement 3.11 In Neighbours City Estates Limited v Mark MushiliJ the Supreme Court had occasion to interpret the Money Lenders Act and conclude that maximum interest chargeable by a money lender licensed thereunder was capped at 48% per annum. 3.12 I reproduce the following part of the judgment delivered by Muyovwe, JS for reference: 7 Appeal No. 47 /2013 Jll "Coming to the main issue, it is clear from the evidence that the appellant in its desperation for money to complete its building pleaded with the respondent to lend it the amount agreed and at the interest agreed. The question is what is the position of the law as regards the interest agreed between the parties? A perusal of the provisions of sf:crion 15 of the Act puts the ceiling on interest charged at 48% per annum. Interest above 48% per annum is described as harsh and transaction unconscionable. In the agreement in issue, interest was up to 120% per annum which is higher than that institutions. ''8 charged (Emphasis added) lending even the by 3.13 It has already been alluded to that given -tl:e lean amount (K320,000) and total repayment (K627,200) for the 12 month term, the interest component was K307,200. 3.14 Interest of K307,200 on a principal sum of K320,000 over 12 months works out to be 96% per annum which is grossly foul of the permissible limit of 4P.% per annum under section 15 of the Money-Lenders Act. 3.15 I therefore disallow the rate of interest under the Second Loan Agreement and substitute in its place 30% per annum which is within the ceiling amount of 48%. 8 Ibid,. Jl3-14 Jl2 3.16 For the avoidance of doubt, given the express prohibition in section 10 of the Money Lenders-Act, the Applicant is not allowed to charge the Respondent compound interest for the default in payment. 3. 1 7 Further, seeing as the Second Loan Agre em en t did not expressly provide for the charging of simple interest on the outstanding loan amount (over and above the interest rate on the principal debt), the Applicant cannot claim the benefit of the proviso to section 10 of the '. Money-Lenders Act. The Applicant's Relief against the Respondent 3.18 Given the express covenant under the Second Loan Agreement that the Respondent should have paid in full by 7 th February 2020, the Applicant is entitled to payment of the balance on the principal debt together with interest at the rate substituted. Jl3 3.19 As for the enforcement against the Leasehold Property in the event of default, the Lands and Deeds Registry Act9 prescribes in section 4(1) that a lease of land for more than a year or document that creates an interest in land of more than a year must be registered in the Lands and Deeds Registry: "Every document purporting to grant, convey or transfer land or any interest in land, or to be a lease or agreement for lease or pennit of occupation of land for a longer term than one year, or to create any charge upon land, whether by way of mortgage or other-wise, or which evidences the satisfaction of any mortgage or charge, and all bills of sale of personal property whereof the grantor remains in apparent possession, unless already registered pursuant to the provisions of the "The North-Eastern Rhodesia Lands and Deeds Registrations 1905" or "The North-Western Rhodesia Lands and Deeds Registry Proclamation, 191 O", must be registered within the times hereinafter specified ii~. the Registry or in a District Registry if eligible for registration in such District Registry:" (Emphasis added) • 3.20 The Lands and Deeds Registry Act in section 5(2)(a) further prescribes a registration window of 30 days from date of signature (if done in Lusaka), failing which the lease or document is null and void by operatk::1 of section 6 thereof. 9 Chapter 185 of the Laws of Zambia Jl4 3.21 Perusal of the Second Loan Agreement shows various Lusaka based addresses for both the lender and borrower (Applicant and Respondent). 3.22 There is however no trace from the face of it that the Second Loan Agreement was registered within 30 days of execution or at all. The same deficiency applies to the Applicant's affidavit evidence. 3.23 It is therefore safe to conclude that the charge purportedly created over the Leasehold Property by the Second Loan Agreement is void for want of registration. 3.24 Coming to the security in form of the Motor Vehicles, the Movable Property (Security Interest) l...et10 (the "MPSI Act") defines a 'security interest' in s.2(1) as: " ... a property right or interest in movable property that is created by agreement or a that secures payment or other transaction p erformance of an obligation, any type of charge or over movable property, consensual lien ... " (Emphasis added) chattel mortgage 3.25 Section 36(1) of the MPSI Act for its part is instructive on when a security interest takes effect. I reproduce the exact wording: 10 No. 3 of2016 JlS • "A security interest is effective when- a) the debtor has rights in the collateral; b) the security agreement is concluded on the dates agreed by the parties; and c) value is given by the secured creditor." (Emphasis added) 3.26 In the case before Court, there can be no debate on the satisfaction of the conditions under section 36(1) (b) and (c) e of the MPSI Act. 3 .27 However, there is no evidence (either by way of exhibit[s] or let alone an averment in the text of the affidavits) that the Motor Vehicles are owned by the Respol).dent . or that he has any rights vested in them. 3 .28 The position could easily have been clarified if the Applicant had exhibited: (i) copies of the registration certificates for the l\tlotor Vehicles; or (ii) perhaps even proof or registration of the alleged security interest in the Collateral Registry under the MPSI Act regime. Jl6 3.29 With such uncertainity, it becomes unsafe and unsound for this Court to conclude that there is (in effect) a security interest to validate enforcement of the charging clause under the Second Loan Agreement against the Motor Vehicles. CONCLUSION AND ORDERS 4.1 In the case before Court, the Applicant has proven on a •- balance of probabilities that there is a debt and that there is default. 4.2 As for the extent of the debt, I order that the same be recomputed based on the principal loan of K320,000 repayable with interest at the rate of 30% per annum from 7 th February 2019 to date of payment in full. 4.3 The recomputation should take into account: (i) the total payment of K129,060 :tr..ade by the Respondent; (ii) the intervals of each payment constituting the Kl29,060; and (iii) apportionement thereof towards reducing the principal loan for purposes of calculating interest on the balance of the principal. • I J17 4.4 The Respondent must pay the recomputed loan balance (principal and interest) within 30 days of service of a written demand thereof by the Applicant in default of which same shall be recoverable by execution without further order. 4.5 For the avoidance of doubt, if the Motor Vehicles are the property of the Respondent then they would not be immune for any such execution. 4.6 The Respondent shall also pay the Applicant's costs of and occasioned by this action, to be taxed in default of agreement. Dat ed at Lus aka this --------------- day o 1lrtf {)~ ------------------------------------2 02 0. K. CHENDA Judge of the High Court J18