Development Bank of Zambia v Hortative Business Agencies Ltd and Ors (SCZ Appeal 150 of 2001) [2002] ZMSC 120 (27 February 2002)

IN THE SUPREME COURT HOLDEN AT LUSAKA (Civil Jurisdiction) JI SCZ APPEAL NO. 150/2001 DEVELOPMENT BANK OF ZAMBA AND HORTATIVE BUSINESS AGENCIES LIMITED HENRY ANGEL MUYOBA PRINCE MUYOBA APPELLANT 1st RESPONDENT 2nd RESPONDENT 3rd RESPONDENT Coram: Lewanika, D. C. J., Sakala and Mambilima JJS 31st January, 2002 and 27th February, 2002 For the Appellant: Mr. B. Gondwe, Legal Counsel JUDGMENT Sakala, J. S., delivered the Judgment of the Court Case referred to: 1. Eastern Cooperative Union Limited v Yamene Transport Limited (1988/1989)ZR126. This is an appeal against a ruling of the Deputy Registrar on assessment of damages. The short facts of the case are that the Appellant had commenced an action for foreclosure of an equitable mortgage and delivery with power of sale of equipment under the equitable charge to the Appellant. The Respondent made a acounter-claim for damages and for loss of business from May 1991 to August 1993 and out of pocket expenses incurred in procuring replacement parts At trial, the Appellant’s claim was dismissed while the court entered Judgment on the counter-claim in favour of the Respondents. The Respondents took out a Summons for assessment of damages. The summons was supported by an affidavit which set out the damages suffered by the Respondents. Subsequently, the Respondents filed an additional affidavit in support of the assessment. Later, the Respondents filed a supplementary affidavit in support of the assessment disclosing the amount of his loss of business. Finally, in 1999 the Respondents filed another affidavit in J2 support of the assessment for damages in which they claimed a sum of K869,596 298.78 as Joss of business. This sum was broken down as follows: - (a) K401,740,804 being loss of business representing the Profit margin; (b) K463,737,189 being interest on loss of business; (c) K389,142.12 being extra money spent on importing replacement of the grinding wheels and; (d) K3,729,163.62 being interest on US$2,500 insurance deposit kept by the applicant. The Appellant filed an affidavit in opposition in which they pointed out that the Respondent had produced different statements of accounts for the same period which could not be relied upon for veracity. At the hearing of the assessment, the second Respondent gave oral evidence in support of the claim while the Appellant called two witnesses. After considering the affidavit and oral evidence, the learned Deputy Registrar noted that the Respondents worked out the losses of business on the basis of two shifts per day The court held that the calculations should be based on one shift per day as that was the capacity that was envisaged. In dealing with the actual figures, the court noted that the Respondents had submitted calculations prepared by certified accountants while the appellant attempted to challenge the Respondents’ figures by submitting a paper showing projected profits and loss account. According to the Deputy Registrar, unlike the statement produced by the Respondents, the paper produced by the Appellant did not explain the basis of the calculations. The Deputy Registrar found it difficult to determine how the Appellant’s figures had been arrived at. Thus, the Deputy Registrar found that the Respondents’ Calculations were not seriously challenged. He assessed damages on the basis of the Respondents’ figures. He rejected the Respondents’ claim on loss of business for the sum of K401,740,804 which was based on a production of J3 two shifts per day. He halved the figure making the claim for loss of business as K200,870,402. He rejected the claim for interests based on loss of business. He granted the claim of K389,142.12 as extra money spent on importing replacement grinding wheels. He also rejected the claim of interests based on US$2,500, The total award by the Deputy Registrar was K201,259,544.12 with simple interest at 10 per cent per annum from the date of claim which was 12th October, 1993 to date of payment. The Appellant has appealed against these awards. On behalf of the Appellant, Mr. Gondwe filed written heads of argument supplemented by oral submissions based on five grounds of appeal. We take note that the appeal is targeted against the whole total award of K201,259,544.12. But this award is made up of K200,870,402 as loss of business and K389,142.12 as extra money spent on importing replacement grinding wheels. Yet, the upshot of the grounds of appeal is centred only on the award of loss of business and interest. The five grounds were couched as follows: “1. The Hon. Deputy Registrar erred in law and in fact by basing his finding on production and profit figures which were not the actual 1st Respondent’s figures. 2. 3. The Hon. Deputy Registrar erred in law and fact by selectively accepting the Appellant’s testimony that assessment of damages be based on the day shift but on the other hand accepted the Respondent’s multiple accounts for the same subject period for which damages were assessed The Hon. Deputy Registrar erred in fact by relying on unreliable gross percentage projections without any justification resulting in inflated damages for loss of business. 4 The Hon. Deputy Registrar erred in law and fact by failing in his assessment to take into account the principle of mitigation of damage and thus have apportioned the damages accordingly. 5. The Hon. Deputy Registrar erred in law and fact by not exercising his discretion justly in the award of interest leading to a further aggravation of award of damages.” J4 On the first three grounds we received written and heard oral arguments and submissions on behalf of the appellant that as regards the loss of business for the year 1993, it was possible to have had actual figures or production and costs thereof as well as the price at which the tiles were sold at as the project must have become operational from about August 1993 as per the affidavit evidence on behalf of the appellant. Mr. Gondwe contended that if the actual figures had been produced, it would have been a useful guide to the court. Other submissions on behalf of the appellant were that the Deputy Registrar erred by relying on day shift figures because the projections must have been unreliable because one set of the projection figures was produced at trial; while another set was produced at assessment stage which set was further amended, making the original figures being amended by 80%. There were also submissions on the measure of damages to the effect that the rule was that a plaintiff is entitled to be placed, so far as money can do it, in the same position as he could have been in had the contract been performed; that the Respondents were entitled to such measure of damages as was contemplated by the parties that is profits to be realized from the sale of tiles they were to manufacture at the time that the Loan Agreement was executed. Counsel contended that it was totally unrealistic that a project with a total investment of KI,947,000 out of which a Bank Loan was KI,306,000 could have had a return of K401,000,000 in under three years. It was finally submitted on the first three grounds that the figures on which the Deputy Registrar based the award were on percentages whose basis was not shown. On the last two grounds Counsel for the appellant submitted that the Deputy Registrar erred in law and fact by failing to take into account the principle of mitigation of damages contending that it was not the appellant’s fault that 28 of the grinding wheels were damaged in transit as this would still have been the case whether the cargo was insured or not. Mr. Gondwe explained that allowance ought to have been taken for the fact that had the equipment been insured in transit, there would still have been the need to process the insurance formalities and place orders for the replacement of the 28 wheels and that going by the finding of both the High Court and Supreme Court, it took six months before the replacement of the equipment was cleared. Counsel submitted that the award of damages should have been limited to the period 1992 to September 1993 giving a period of six months with which the replacement would have been made had the equipment been insured. J5 Mr. Gondwe also complained of the award of interest over the figure of K200,870,402 which figure he submitted was unsubstantiated. On behalf of the Respondents Mr. Sambo also filed written heads of argument supplemented by oral arguments and submissions. We received and heard submission on behalf of the Respondents that the projection figures were based on the ruling prices as at the time; that there were comparisons on prices from other producer of similar products and on the basis of the market itself and that the other consideration for the figures was the capacity of the equipment. We have anxiously considered the judgment of the Deputy Registrar and the submissions by both learned Counsel. At the outset we take note that Counsel for the appellant did not address the court on the amount of K389,142-12 awarded as extra money spent by the Respondents on importing replacement grinding wheels. On the evidence on record, this award could not be seriously challenged. We, therefore have no hesitation in dismissing the appeal against this award as being without merit. We confirm this award with interest as indicated in this judgment. The appeal against the award for loss of business gave us very anxious moments. One of the areas that caused us anxiety was the number of affidavits filed by the Respondent in support of assessment totaling about four; described variously as “Affidavit in support,” “additional Affidavit in support”, “supplementary Affidavit in support” and “Affidavit in support.” We are not sure whether some of these affidavits were filed with the leave of court. The effect was that some of these affidavits amended the original figures claimed thereby throwing the projection into total confusion. J6 Mr. Gondwe complained that in the circumstances where different statements of account for same period were produced; the question of the reliability of the projection figures became an issue. The point was well taken. But the Deputy Registrar found that the paper produced by the appellant did not explain the basis of their calculation. The court found that the Respondents’ calculations were not challenged and assessed damages by going by the respondents’ figures. Another area that caused anxiety was the amount claimed as loss of business. We agree with the submission by Mr. Gondwe that it was totally unrealistic that a project of this nature would make a return of K401,000,000 in under three years. The summons for assessment of damages was heard sometime in July 1999. From the evidence, the equipment must have gone into operation sometime in 1993. If figures for that year had been recorded, they would certainly have been a very useful guide to the Court. The Court however accepted the single shift projection figures and rejected the double shift figures. All we can say is that the Deputy Registrar did his best. The problem as we see it is not one of the measure of damages, but to determine for what period the amount of loss of business should have been awarded. The Respondents had claimed KAO 1,740,804 as being loss of business representing the profit margin from 1991 to 1993. The Deputy Registrar halved that figure on the ground that the loss should be based on one shift a day. Thus he awarded K200,870,402. In the case of Eastern Cooperative Union Limited V Yamene Transport Limited, (i). We set aside an award which was made in the court below for a profit making bus damaged beyond repair. In that case, the award had been extended from the date of the accident in December 1980, to the date of the judgment which was 4th June 1986. In setting aside the award, the court stated: “We wish to affirm that, in a case of this nature, it has been and it is always the duty of the plaintiff to minimize his loss and where the plaintiff fails to do so he cannot expect the court to award damages which will be limitless both as to time and extent” The damages in the Yamene case were assessed on the basis that a prudent plaintiff would have taken steps to replace the chattel which had been damaged. In the instant case, we have taken into account that the Respondents sought replacement grinding wheels. But even if the appellant had insured the equipment, this in itself would not have prevented the damage in transit but that the respondents would not have incurred an extra expense. Thus, the delay in making the replacement of the wheels and the subsequent loss of business could not totally be placed on the appellant. Going by the authority of the Yamene case, we are compelled to limit the amount of loss of business in terms of period. In doing this, we take the projection figures based on The Profit and Loss Account of 1992, the full year of the loss. The net profit for 1992 was projected at £99,685,122-50. Doing the best we can, we award a sum of £33,228,374 representing loss of business as one third per annum. All the awards carry interest at an average short term deposit rate from the date of the writ to the date of this judgment; thereafter at bank lending rate. This conclusion takes care of the ground or complaint relating to interest awarded by the Deputy Registrar. With regard to costs we consider that the appellant has ultimately won the appeal and costs will follow this event. The appeal is therefore allowed on loss of business. The figure of the Deputy Registrar on loss of business is set aside in its place we award K33,228,374 with interest as indicated. Costs will be taxed in default of agreement. D. M. LEWANIKA DEPUTY CHIEF JUSTICE E. L. SAKALA SUPREME COURT JUDGE I. C. MAMBILIMA SUPREME COURT JUDGE