Credit Africa Bank Ltd (In Liquidation) v Al Shams Building Materials Trading Company Ltd (Appeal 11 of 2000) [2001] ZMSC 100 (21 September 2001)

IN THE SUPREME COURT OF ZAMBIA APPEAL NO. 11/2000 HOLDEN AT LUSAKA (CIVIL JURISDICTION) BETWEEN: CREDIT AFRICA BANK LIMITED (In Liquidation) AL SHAMS BUILDING MATERIALS TRADING COMPANY LTD. Appellant Respondent CORAM: Sakala, Chirwa & Chibesakunda JJS On 9th August 2000 and 21st September 2001 For the Appellant: For the Respondent: Mr. C. K. Banda, SC. Chifumu Banda Associates Mr. M. Mundashi, Mulenga Mundashi & Co. Mrs. N. Sharpe-Phiri, Mopani Chambers JUDGMENT Chirwa, J. S. delivered the judgment of the Court: - This is an appeal against the High Court Judgment in which the respondent was awarded the sum of US$350,000 plus 21% interest as agreed by the parties and a further statutory interest on the whole amount of the award from date of the writ. From the evidence before him, the learned trial judge found that there was a written loan agreement of US$350,000 with agreed interest of 21% per year. The respondent was to advance this loan and the loan was secured by a charge on 23 motor vehicles belonging to the appellant. This charge was registered with the Registrar of Companies on 8th December 1997. The judge also found that prior to the agreement and the charge, the appellant received a sum of 1.5 million US dollars through the Bank of Zambia for the benefit of the : J2 : respondent. The learned trial judge also found that the appellant failed to explain on whose instructions the equivalent kwacha of 1.5 million US dollars was split into three accounts and where this money was. He further found as a fact that the US$350,000 was received by the appellant per the loan agreement The learned trial judge also dismissed the argument that the charge was null and void because it was created on 8th . December 1997 when it was registered when the appellant was already placed under receivership. The learned judge also held that the money transferred from dollar account of the respondent to the appellant lease account never at any time became assets of the appellant for their benefit. As we stated it is against these findings and awards that the appellant appealed. The memorandum of appeal indicated three grounds of appeal but these were expanded to five grounds and these were fully argued in the written heads of arguments. The first ground of appeal was that the learned trial judge erred in law and fact by holding that the respondent had a lease account with the appellant and that there was also evidence to show that the defendant had obtained the US$350,000 from the respondent. It was argued that the learned trial judge erred in law and fact in finding that the evidence that US$350,000 was withdrawn from the respondent account and transferred to the appellant and this was supported by evidence. It was argued to the contrary that although there was evidence that US$1.5 million was received for the benefit of the respondent, the same was disbursed to the accounts of PW1. It was also argued that the learned trial judge erred in taking into account extraneous matters of the receiver not taking an inventory as required under Section 97 of the Banking and Financial Services Act as that was never an issue before him. In response to this head of argument it was argued that the learned trial judge never erred In holding that PW1 had an account with the appellant and PW1 was doing business on behalf of the respondent. It was submitted that that Ji : J3 : X 4* in fact this ground should be dismissed as it is on facts only and no law is involved. It was also argued that the reference to an inventory under section 97 of the Banking and Financial Services Act cannot be extraneous as this would have helped in establishing the assets and liabilities of the appellant We have considered this ground of appeal with the able assistance from the written submissions and verbal elucidation by counsel. We must say to begin with that the learned trial judge never made a finding that the respondent had a lease account with the appellant. The portion of the judgment quoted clearly defeats this argument. The passage quoted reads as follows: “Further, the plaintiffs evidence that PW1 maintained a US dollar account with the defendant bank and that the sum of US $350,000 was withdrawn from this account and transferred to the defendant is supported by documentary evidence. There is amongst the exhibits that I accepted, without objection, a statement of the plaintiffs US dollar account held with the defendant bank showing a debt of us $350,000 dated 31st October 1997 transferred on the same day to the defendant’s lease account’. Nowhere did the learned trial judge hold that the respondent had a lease account with the appellant. Further we are of the opinion that the issue of inventory cannot be regarded as extraneous in this case. It is an obligation of the receiver of any financial institution under receivership to prepare an inventory as soon as possible. This will show the assets and liability of the institution and through this inventory one would know the status of the institution. The case of KAPEMBWA V MAIM BO LWA [1981] Z. R. 129 referred to by the counsel for the appellant is irrelevant to this appeal. This ground of appeal must fail. It is necessary to put grounds 2 and 3 together as they are inter-related. Ground 2 is that the learned trial judge erred in holding that in so far as the appellants had failed to prove how the US$1.5 million belonging to PW1 had been used, then the conclusion is that the US$350,000 was lent to the appellant. Ground 3 is that the learned trial judge erred in law by not considering the full effect of the provisions of Section 98 of the Banking and Financial Services : J4 : x e» Act. It was submitted that the purported loan of US$350,000 should be treated as an ordinary unsecured or trade debt. However, the creation of a charge turned the same into a preferential debt and this attempt to transfer the assets of the appellant to the respondent was not recognized in law under Section 98 (1) (c ) (i) of the Banking and Financial Services Act; the change was registered at the time the bank was already in receivership. The learned trial judge erred in law in holding that the appellant was under a legal obligation to create the charge the responsibility of creating the charge lay on the respondent. The charge having not been registered until the bank went into receivership could be repudiated and was repudiated by the receiver. In reply to these two grounds of appeal it was submitted that the respondent was not a legal entity, it was a firm and that there was evidence that PW1 was in control of all its activities in Zambia. It was argued that DW1 in the Court below failed to explain on whose instructions the US$1.5 million was distributed. Further he failed to do so because he had no access to the ledger where the transactions were recorded. We have considered these two grounds of appeal. Nowhere in the judgment did the judge conclude that because the appellant failed to show how the US$1.5 million belonging to PW1 had been used, it proved that US$350,000 was lent to the appellant. The trial judge concluded that there was a loan of US$350,000 from PW1 to the appellant by the loan agreement and also the record tracing the movement of the money from the Bank of Zambia to the appellant bank for the benefit of PW1 and his affiliates. This money was received by the appellant and the movement of this money after receipt was recorded in the register which was a normal bank document kept by the appellant and used in its business. From the evidence of DW1 it is clear that PW1 dealt with Mr. Nizam the Chairman of the appellant and Mr. Muntanga vice-Chairman. : J5 : Mr. Muntanga was available during the trial and if there was no loan agreement he could have stated so but he was never called. The only evidence on the loan was that of PW1 and the available documents. We are also unable to agree that the learned trial judge failed to consider the full effect of the provisions of Section 98 of the Banking and Financial Services Act. The effect of the loan agreement was properly given the effect under the provisions of Section 98 (1) (c) and Sub­ Section 2. There was no evidence from the receiver why he purported to repudiate the charges and the judge was perfectly entitled to evoke the principles of equity that the appellant cannot benefit from the loan and from the sale of motor vehicle charged to secure the loan. The total effect of Section 98 (1)(c) and Sub-Section 2 is that PW1 and the respondent become preferential creditors. These two grounds of appeal cannot succeed and they are dismissed. The 4th ground of appeal is that the learned trial judge erred by holding that the appellant is liable to the respondent even if the charge had been repudiated because there was evidence that the appellant had appropriated the respondents property. It was argued that there was no evidence that the respondent had an account with the appellant from where the appellant appropriated the assets. We are of the opinion that this ground is merely re­ casting grounds 2 and 3 which we have already covered. We wish to emphasize that the Court was never given any evidence by the receiver on what ground he repudiated the charges thereby making the appellant get both the loan money and the proceeds from the charged property. This is unjust enrichment. We would also dismiss this ground. The last ground of appeal was that the learned trial judge erred in law for not finding that even if the appellant is liable the judgment cannot be enforced and has to stand in line with the order preference in accordance with Section 107 of the Banking and Financial Services Act. We have been unable to see or read in the judgment where the judge directed or ordered how this judgment debt is to .. s, . : J6 : be enforced. It is our opinion that Section 99 of the Banking and Financial Services Act should guide the parties. On the totality this appeal is dismissed with costs both here and the Court below. The same are to be taxed if not agreed. E. L. SAKALA SUPREME COURT JUDGE D. K. CHIRWA SUPREME COURT JUDGE L. P. CHIBESAKUNDA SUPREME COURT JUDGE