Development Bank of Zambia v Hortative Business Agencies Ltd and Ors (SCZ Appeal 129 of 1996) [1998] ZMSC 106 (19 March 1998)

IN THE SUPREME COURT OF ZAMBIA SCZ APPEAL No.129 OF 1996 HOLDEN AT LUSAKA (CIVIL JURISDICTION) BETWEEN: DEVELOPMENT BANK OF ZAMBIA APPELLANT AND HORTATIVE BUSINESS ANGENCIES LIMITED HENRY ANGEL MUYOBA PRENCE MUYOBA 1ST RESPONDENT 2ND RESPONDENT 3RD RESPONDENT Coram: Bweupe, D. C. J., Sakaia and Muzyamba JJS 15th April 1997, 1st July 1997, 19th March 1998 24th November 1998, 26th January 1999 and 15th March 1999 For the Appellant: M. C. Kayuma, Legal Counsel For the Respondents: P. Chisi, Chifumu Banda and Associates JUDGMENT Muzyamba, J. S. delivered the judgment of the court. This is an appeal against a finding by the High Court that it was the duty of the appellant to insure the 1st respondent's machinery and equipment while in transit from the suppliers in Italy to Zambia and an award of damages for loss of business suffered by the respondents as a result of the appellant's failure to insure the goods. The brief facts of this case are that the appellant loaned the 1st respondent K213,000-00 and 116,000 US dollars to respectively set up a plant and buy and import machinery and equipment from Italy for manufacturing cement and terrazo floor tiles. As a security for the repayment of the loan the 1st respondent mortgaged its farm on subdivision 1 of subdivision B of Farm No.197a Lusaka. The 1st respondent also executed a specific charge or charges attaching all the machinery and equipment imported and all its vehicles existing at the time and a floating charge on all its furniture and fittings. The 2nd and 3rd respondents jointly and severally guaranteed the loan as shareholders of the 1st respondent. It is common cause that out of US $116,000 the appellant retained US $2,500 for insurance. When the goods arrived in Zambia it was discovered that out of 34 grinding wheels for the production of the tiles 24 were damaged beyond repair and 4 were cracked and could not be used. The respondents then approached the appellant for details of insurance cover so that they could claim from the insurer for a replacement : J2 of the wheels. The respondents were told that the goods were never insured. The respondents then asked the appellant to release to them the sum of US $2,500 meant for insurance so that they could use it to replace the damaged wheels. This was in May 1991. Instead of releasing the US $2,500 the appellant paid into the 1st respondent's account held at Zambia National Commercial Bank, Northend Branch, Lusaka a sum of K155,000. Due to scarcity of foreign exchange at the time, a letter of credit was not issued by the bank until 5th March 1993 and the replacement wheels arrived in the country in June 1993 and cleared by customs on 24th August 1993. In the mean time the 1st respondent failed to service the loan and fell in arrears. The appellant then issued originating process for payment of the principal and interest, which stood at K707,179-66 within 6 months failing which to deliver vacant possession of the mortgaged farm and surrender all machinery, vehicles, furniture and fittings comprised in the specific and floating charges. The respondents counter-claimed for damages for loss of business. The appellant's application failed but the counter-claim succeeded. On behalf of the appellant Miss Kayuma argued four grounds of appeal. We propose to deal with those grounds in the order she argued them and depending upon what we say on the ground 1 we shall then turn to other grounds. k The first ground she argued is that the learned trial Commissioner misdirected himself when he based his whole judgment on the clauses in schedule four (4) which refer to insurance of assets on site and comprises the bank's security anSP/'insurance of machinery in transit. She argued that clause (a) of the 4th schedule dealing with Insurance related to goods on site and not in transit. That the learned Commissioner was therefore wrong in holding that it was the appellant's duty to insure the goods while in transit. More so that the respondents produced a C. & F (Carriage and Freight) and not a C. I. F. (Cost, Insurance and Freight) proforma invoice. In reply Mr. Chisi submitted that the learned Commissioner was right in his holding that it was the appellant's duty to insure the respondent's goods while in transit and that this was borne by the fact that the appellant retained the sum of US $2,500 for insurance. We have considered the arguments by both learned Counsel and we have also examined the loan agreement and the evidence on this issue. The relevant part of the 4th schedule provides: "Insurance (a) All property subject to the bank's security shall be insured through the bank's insurance agency." J3 : Undisputed evidence was led at the trial that before the goods were shipped the suppliers sent a telex message to the respondents. The telex is at page 101 of the record of appeal and it reads in part: '*We inform you that the machinery addressed to you has been delivered to the forwarding agent and will be loaded on S/S "CRANAH" whose departure is scheduled for the 6th December 1990 towards the port of Dar-es-Salaam. Goods packed in No.3 cases stored in No.1 container No. MSCU 279400/9. Please kindly arrange for relevant insurance. LONGINOTTI S. P. A.“ It is also undisputed that when the respondents received the telex they gave it to the appellant to insure the goods. This was not done. Nor did the appellant at that stage say that it was not its duty to insure the goods while in transit. It is therefore neither here nor there that the respondents produced a C & F pro forma invoice. Moreover, if it was not the duty of the appellant to insure the goods while in transit then we fail to see the logic of retaining the US $2,500 because one does not need foreign exchange or dollars to insure goods locally. We do not therefore agree with Miss Kayuma1s interpretation of Clause (a) in the 4th schedule recited above. On the evidence before him the learned Commissioner was therefore perfectly right to come to the conclusion that he did. We find no merit in the first ground and the appeal would fail on this ground. The remaining grounds were hanging to ground 1 and ground 1 having failed the other grounds cannot succeed and more importantly, as Mr. Chisi rightly argued, the other grounds relate to quantum of damages and they can be argued during assessment of damages. The appeal was bound to fail. It is dismissed with costs to be taxed in default of agreement. B. K. BWEUPE DEPUTY CHIEF JUSTICE E. L. SAKALA SUPREME COURT JUDGE W. M. MUZYAMBA SUPREME COURT JUDGE