Chiku Medical and Pharmaceutical Industries Limited v Norman Mbazima (sued as Received of Commerce Bank Limited) and Anor (APPEAL NO. 78 OF 2004) [2006] ZMSC 44 (28 August 2006)

;, I IN THE SUPREME COURT OF ZAMBIA APPEAL NO. 78 OF 2004 HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: CHIKU MEDICAL AND PHARMACEUTICAL AND PHARMACEUTICAL INDUSTRIES LIMITED APPELLANT AND NORMAN MBAZIMA (Sued as Receiver of Commerce Bank Limited) AND 1 ST RESPONDENT BERNARD LEIGH GADSDEN (Sued as Receiver of Chiku Pharmaceutical Industries Limited) zND RESPONDENT CORAM: LEW ANIKA, DCJ, MUMBA AND MUSHABATI, JJS. On 23rd March, 2006 and 28th August, 2006 For the Appellant: N. Okware of Okware and Associates. For the Respondents: A. Siwila of Mambwe Siwila and Company. JUDGMENT Mushabati, JS., delivered the judgment of the Court. This is an appeal against the High Court judgment dismissing the appellant's claims. In these proceedings we shall continue to refer to the appellant and respondents as the plaintiff and defendants, the positions they held in the court below, respectively. J2 The plaintiff, by originating summons, sought for the following reliefs:- ]. For the court to ascertain the correct over-draft monies due to the first defendant after the discovery of over payments and an un-authorized debits from the over-draft account of the plaintiff. 2. That in default of the plaintiff and the defendants agreeing on the correct over-draft amounts and interests due to the first defendant an account be taken of what is due to the plaintiff from the defendant under or by virtue of the said debenture. 3. For further or other relief and costs. The undisputed facts of this appeal are that the plaintiff applied for a loan from the 1st defendant which the first defendant granted to the plaintiff. The plaintiffs Managing Director issued out pre-signed cheques to the defendant's manager a Mr. Khan. An over-draft/loan account was opened in which some funds were made available for the use of the plaintiff. Some funds were withdrawn using the pre-signed cheques presented to the 1st defendant by the plaintiffs Managing Director. A debenture creating a floating charge over the plaintiffs assets was prepared as security for the said loan. The main dispute was whether the plaintiff company did really benefit from the said loan facility. The plaintiff disputed utilizing the said facility. The plaintiff company adduced its evidence through its Managing Director Dr. Patrick Mwewa Anthony Chik:usu. His evidence can be summed up as follows: That the 1st defendant company's Managing Director Abdul Rashid Khan authorized a K400,000,000 loan to be secured J3 by floating debenture which was duly signed in November, 1994. Though this loan was approved the funds were not disbursed because the 1st defendant's Managing Director devised another loan facility for the plaintiff company for K500 million which was secured by yet another set of pre signed cheques. The cheques were signed by the witness. The pre-signed cheques signed on 26th August, 1994 had a total face value of K500 million. This amount was credited to the plaintiff's over-draft account instead of the loan account. The amount was later, discovered to have been withdrawn and the plaintiff company was informed that the money was paid out to the people from whom the said funds were obtained. The funds were paid out using the pre-signed cheques. This was done by the 1st defendant's Managing Director who after being queried about the disappearance of the said money promised to reverse the accounts. The money was brought back on the same basis that the plaintiff gave pre-signed cheques as security. In October, 1994 the witness pre-signed other cheques. A sum ofK500 million was, for the second time, withdrawn from the account without the plaintiffs knowledge. In November, 1994 a sum of K495 million was deposited into the plaintiff's current account which they requested to be transferred into his loan account. In February, 1995 Mr. Khan encashed a cheque of K7 million and in March, 1995 he encashed the pre-signed cheques which totalled to KS00 million. Like on previous occasions Mr. Khan yet again promised to reverse the amounts. The plaintiff received a letter from the 1st defendant informing it of its indebtedness in the sum of between Kl .2 billion and Kl .6 billion. The plaintiff was subsequently presented with debenture forms to sign. The loan amount had been raised from K400 million to Kl .6 billion. The plaintiff refused to sign the debenture deed because it was not aware of how that figure was arrived at. The only acknowledged amount was K463 J4 million which was secured by a mortgage on a house worth K480 million in Kabulonga, for which a judgment was duly consented to? The plaintiff was therefore, praying for the discharge of the debenture and mortgage on the following properties, Plot No. 7348 Nangwenya Road, Rhodes Park and Plot No. 7 417 Mubula Road, Chilenje South, Lusaka. The I st defendant company called Belly Hambaala Dubeka who was its liquidation Manager as a witness. He testified that the I st defendant was liquidated on 5th Jnauary, 2001 and in the process of liquidating the bank he discovered that Chiku Medical and Pharmaceutical Industries Limited had one of the largest, if not the largest, account. As he was in charge of the debt recoveries he pursued the plaintiff in order to recover the debt owing. P. W.1 told D. W.1 that the money was in fact taken by Mr. Khan. D. W.l said since the cheques were signed by him it was he who owed the money in question. Dr. Chikusu, when shown the signed cheques, admitted that the signatures on them were his. D. W.1 concluded that nobody else but Chiku Medical and Pharmaceutical Industries Ltd borrowed the said money. The learned trial judge, after reviewing the evidence on record, found that the plaintiffs claims were baseless and dismissed them with costs. The trial judge then ordered a fore-closure of the property secured under the debenture deed executed by the plaintiff and the defendant. The plaintiff appealed against this judgment and filed five grounds of appeal which are as follows:- ]. The trial Judge erred in law and fact by holding that the failure by the 1st defendant to provide an account of the monies owed to the defendant by the Plaintiff by end of February, 1996 had no bearing on the state of ajf airs because on the JS facts available, the Plaintiff had challenged the figures provided by the pt defendant which the pt defendants failed to do and only did so three years later and which figures were rather exaggerated. 2. That the trial Judge erred in law and fact by holding that because the Plaintiff's managing Director had pre-signed the cheques, he must be deemed to have taken the money because there was evidence of challenge by the Plaintiff's managing Director to the 1st defendant to provide summary sheets and to indicate which teller encashed the money which the Plaintiff is alleged to have collected. 3. The trial Judge erred in law and in fact by holding that the calling of Mr. Khan, Managing Director of the rt defendant Bank as a witness the plaintiff's was not necessary as both Managing Director and Mr. Khan were in the same boat because evidence from the PlaintifFs Managing Director was such that Mr. Khan was the one who enticed the Plaintiff's Managing Director to borrow money from the bank and that security was the pre-signing of the cheque and therefore, his evidence was crucial and he should have been cross-examined to establish his innocence in the whole deal J6 4. failing The trial Judge also erred in law and in fact by the r' the defendant provided the loan money to to consider whether indeed Plaintiff or it was from other sources as the Managing Director for the r' defendant had the Managing Director of the suggested to Plaintiff during the negotiations for the loan. 5. The trial Judge also erred in law and in fact by holding that the pt defendant can enforce the foreclosure through the debenture signed because evidence available does not show that there was nay debenture signed in this regard apart from the attempt the P' defendant made to force the Plaintiff to sign the debenture documents which the Plaintiff ref used. Both counsel tendered written heads of arguments on which they entirely relied on except for a brief reference to the debenture deed which created floating charge on the plaintiffs assets. Counsel for the defendant referred to the debenture deed on pages 93 to 103 for Kl.2 billion. On the other hand the plaintiff's counsel referred to the debenture deed on pages 82 to 92. In fact a close look at these two documents showed that they were one and the same document. There is no difference between them as they contain the same details. We shall refer to these documents later in the course of this judgment. The gist of the plaintiff's submission was that the court below erred in law and fact when it held that the failure by the 1st defendant to furnish an account of the money owed to the defendant had no bearing on the case J 7 because the plaintiff did not accept that he owed the defendant Kl .2 billion. He further argued that the plaintiff's Managing Director should not have been deemed to have received the money just because he had pre-signed the cheques on which the various sums were withdrawn. He contended that the defendat's Managing Director Mr. Khan was the one who got the money, which fact the 1st defendant failed to investigate despite the fact that this was a serious allegation against its own Managing Director. The defendant instead relied on the evidence relating to the pre-signed cheques. The plaintiff's counsel continued to argue that the court had failed to resolve the issue of who provided the loan to the plaintiff, whether it was the defendant Bank or some other source because its own Managing Director suggested that the money came from the latter. Finally it was submitted that there was no document which was executed by the plaintiff giving security for the Kl.2 billion loan. The plaintiff admitted signing the debenture deed for K400 million. The 1st defendant's submission was to the effect that the appeal was purely against findings of fact which can only be appealed against if they were mixed with findings of law. As to the finding of the lower court that the pre-signed cheques were enough proof that the plaintiff utilized the funds which were obtained after they (the pre-signed cheques) were encashed, the counsel said this was a correct finding and so the court below was justified in so doing. On the third ground the 1st defendant argued that the court could be faulted by holding that had Mr. Khan been called as a witness he was not going to give any favourable evidence to the plaintiff. He further argued that the onus to call Mr. Khan in fact rested on the plaintiff because it was he who ought to have proved his case against the defendants. The counsel concluded his submission by saying that the court below did not err J8 in anyway when it held that the defendant had given some credit facility to the plaintiff because this was supported by the evidence of D. W. l and D. W.2. This was further supported by the Debenture Deed dated 4th August, 1995 which was valid and enforceable. We have carefully considered the submissions above and in our view the main issue at hand is whether the funds that were withdrawn on the strength of the cheques pre-signed by the plaintiffs Managing Director were in fact utilized by the plaintiff. The court below found in favour of the 1st defendant and this was a finding of fact. We agree with counsel for the 1st defendant that most of the issues raised in this appeal were findings of fact which, as correctly pointed out, this court can rarely over-tum. It must have been a strange arrangement that cheques drawn by the plaintiff's Managing Director must be paid to some unknown person without his knowledge but the debt only to be debited to the plaintiff. The plaintiffs Managing Director issued a number of pre-signed cheques which he said he had given to the I st defendant's Managing Director as security. If it were true that the 1st defendant's Managing Director did not account for the funds withdrawn on the strength of the pre-signed cheques, we fail to understand why the plaintiffs Managing Director had again issued subsequent pre-signed cheques to the 1st defendant's Managing Director. This was in light of the assertion that the plaintiff had never received the funds obtained using the first cheques. The cheques were signed by the plaintiffs Managing Director and so these were his documents. He was therefore, estopped from denying that the plaintiff was not the beneficiary of the funds drawn on the strength of those J9 cheques. D. W.1 testified that the plaintiff company "had one of the largest if not the largest balance." Where did company get those funds? If those funds were not from the facility provided by the 1st defendant we have no doubt that the plaintiff would not have issued those cheques as security, as per P. W.1 's own evidence. According to P. Wl the pre-signed cheques were issued as security for the loan facility applied for. P . Wl the Managing Director of the plaintiff company denied knowledge of the Kl .2 billion loan. The debenture deed which was referred to us at pages 82 to 92 by his own counsel, as we said elsewhere above, was in fact exactly the same as that which the counsel for the defendant referred to at pages 93 to 103. We had an oppommity of comparing the two documents on record with an original debenture deed made available to us during the hearing of this appeal. We observed that it was the original debenture deed from which the two documents on record were produced. The three documents are all duly executed by the parties including the plaintiff company. The amount on both documents is Kl .2 billion. The plaintiffs counsel confirmed that the plaintiff signed the debenture deed at pages 82 to 92 which we have already said was exactly the same document as that at pages 83 to 103. We have so far said these documents were reproductions of the debenture document that was made available to us in court and was a duly executed document by all parties. We really find no merit in the plaintiffs denials of the Kl.2 billion loan or else he would not have signed the said debenture deed. As already alluded to above, the entire submissions centred on the issue whether the plaintiff obtained the funds in dispute. Having considered the evidence and submissions before us and the debenture deed on record we have no hesitation in fmding that the plaintiff was truly indebted to the J 10 I st defendant in the sum of Kl .2 billion. We are satisfied that all the necessary documents proving his indebtedness to the 1st defendant were made available to him hence he executed the debenture deed dated 4th August, 1995 (the date appearing on all the copies of the debenture deed we have referred to in our judgment). The non-calling of the 1st defendant's Managing Director by the 1st defendant did not work against it because it was the duty of the plaintiff, as the person who was alleging, to prove what it was alleging. The evidence on record was overwhelmingly in support of the finding for the 1st defendant. We find no merit in all the grounds of appeal, indeed in the entire appeal. We must comment on the impropriety of the plaintiff suing its receiver. A receiver of a company, when acting in his official capacity, acts on behalf of such company under receivership. A company under receivership has no capacity to sue on its own. It can only do so through its Receiver/Manager. The purported action against Bernard Leigh Gadsden, the receiver of Chiku Medical and Pharmaceutical Industries Limited by the plaintiff, was irregular in that the plaintiff was in fact suing itself. The proper party to sue the 1st defendant was in fact the 2nd defendant and not the plaintiff. We have decided to comment on this issue for future guidance though none of the parties raised it. Finally the lower court, after dismissing the plaintiff's claims, ordered a fore-closure of the property secured under the debenture deed. This was not one of the reliefs pleaded before the court. Much as the defendant reserved its rights of fore-closure of the assets under the said debenture deed, the order made herein was irregular. It must be a subject of different action. In other words the defendant was at liberty to institute fresh proceedings to exercise its right arising out of the floating charge secured by the debenture J 11 deed dated 5th August, 1995. The order of fore-closure was therefore null and void and it is set aside. The sum total of this appeal is that it has no merit and is dismissed with costs. In default of agreement they shall be taxed. D. M. Lewanika ~ / F. N. M. Mumba DEPUTY CHIEF JUSTICE SUPREME COURT JUDGE ~~~- SUPREME COURT JUDGE ,f