Ecobank Zambia Limited v Nobel Construction Limited and Ors (2012/HPC/0589) [2020] ZMHC 426 (23 April 2020)

IN THE ffiGH COURT FOR ZAMBIA 2012/HPC/0589 AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: ECOBANK ZAMBIA LIMITED PLAINTIFF AND NOBEL CONSTRUCTION LIMITED ANDREW NKOSI BERNADETTE NKOSI NATIONAL HOUSING AUTHORITY I ST DEFENDANT 2ND DEFENDANT 3RD DEFENDANT 4 TH DEFENDANT Before the Honourable Mrs. Justice Irene Zeko Mbewe Appearances: For the Plaintiff Ms M Siansumo of Messrs Malambo & Company For the JS', 2nd and 3rd Def endant: Ms I Nambula of Messrs Sharpe Howard For the 4th Defendant Legal Practitioners Mr MC Hamachila of Messrs lven Mulenga and Company JUDGMENT Cases referred to: J. Mohammed v Attorney-General SCZ Judgment No 26 of 1982 2. Julius Berger Nigeria Pie and Another v Toki Rainbow Community Bank Limited 2019 LCN/4642 SC Jl I P ag e .. , 3. Dunlop Pneumatic Tyre Co Limited v Selfridge and Company Limited {1915] AC 847 Other referred to works: I. Chitty on Contracts General Principles, Volume 1 2. Timothy N Parson and J R Lingard "Banking Security Documents" 61 " Edition, London: Butterworth [1] The Plaintiff commenced legal proceedings by way of writ of summons ~ claiming for the following reliefs: 1. That the JS1 , 2nd , 3rd and 4th Defendants jointly and severally pay the sum of ZMW476,500.00 being money owed to the Plaintiff as at 3JS' October 2010 as a consequence of default by the JS1 Defendant on repayment of loan facilities. 2. An Order that the 4th Defendant pays over to the Plaintiff all contractual proceeds due to the JS1 Defendant and still in its possession. 3. Interest on the said sum due at the facility rates from 3JS' October 2010 to date of issue of the writ and thereafter as the Court may determine. Any other relief the Court may deem just. Costs. 4. 5. [2] The Plaintiff claim originates from a trade loan facility dated 15th April 2010 availed to the !51 Defendant in the sum of ZMW476,500.00. The said facility was payable on 3 l51 October 2010. The l51 Defendant executed a document of domiciliation of receivables in respect of its account held with the Plaintiff (ii) irrevocable domiciliation of contract proceeds from the 4th Defendant (iii) executed assignment of receivables J2 I Page (iv) executed and unlimited joint and several personal guarantees of its directors. [3] On 16th April 2010, the 2nd and 3rd Defendants guaranteed the payment of all sums due on any account owing by the 1 st Defendant to the Plaintiff together with interest, commissions, charges, costs and expenses until date of full repayment. [4] The 151 Defendant assigned the proceeds of contracts made between then l51 and 4th Defendants to the Plaintiff. The 4th Defendant duly acknowledged the said domiciliation of proceeds and confirmed it would pay all proceeds to the Plaintiff in accordance with the I st Defendant's instructions. [5] According to the Plaintiff: the I st Defendant breached the terms of the facility by its failure to repay the loan facilities on the expiry dates and has neglected to liquidate its debts notwithstanding several demands for payment made by the Plaintiff. [6] It is further alleged that despite the written demands, the 2nd and 3rd Defendants in breach of their guarantees have failed to liquidate the 1 st , . Defendant's indebtedness to the Plaintiff. The consequence of the default is that the Plaintiff has suffered loss. [7] The Pt, 2nd and 3rd Defendants filed its defence on 9th November 2012. The 1 st Defendant admitted it was availed a loan facility for financing of the 4th Defendant's project for the supply of goods and services which services were confim1ed in writing by the 4th Defendant to the Plaintiff. [8] On the 2nd and 3rd Defendants' part, they alleged that the personal guarantees and indemnity executed would be extinguished by the 4th Defendant meeting its contractual liability to the 1 st Defendant through the account held with the Plaintiff. According to the 2nd and 3rd J3 I Page Defendants, in breach of its agreement with the 1 st Defendant, the 4'h Defendant failed or neglected to pay its contractual obligations to the 1 st Defendant through the bank account held with the Plaintiff causing loss to the 1 st Defendant. [9] The 2nd and 3rd Defendants denied they are in breach of the written guarantees by their failure to liquidate the 1 st Defendant's indebtedness to the Plaintiff. [1 O] In the 4th Defendant's defence it denied being party to the arrangement between the Plaintiff and I st Defendant. That any guarantees purportedly made between the Plaintiff, 2nd and 3rd Defendants with respect to the borrowed monies did not attach any liability to the 4th Defendant. [11] The 4th Defendant averred it had requested for an overdraft of about ZMW3,600,000.00 to be used to pay its contractors of which the 1 st Defendant was one of them and liquidated the said facility in full leaving no liability to either the Plaintiff nor the 1 si, 2nd and 3rd Defendants. [12] According to the 4th Defendant the pt Defendant the obligation to pay its suppliers and contractors lay with the Plaintiff bank which bank had been mandated to facilitate payments to the 4th Defendant's contractors using the overdraft facility. The 4th Defendant denied that it acknowledged the assignment of proceeds and committed itself to being liable to pay or liquidate the loan advanced to the 1 st Defendant by the Plaintiff. [13] The 4th Defendant denied it was privy to any facility that the Plaintiff purportedly availed to the 1 st Defendant and denied owing the claimed sum of ZMW476,500.00 to the pt Defendant or at all. [14] The 4th Defendant averred the assignment of receivables was an agreement between the Plaintiff and the 1 st Defendant and the 4th Defendant is not privy to any assignment or at all. J4 IP age [15] According to the 4th Defendant, the 1 st Defendant was awarded a contract to construct three houses on behalf of the 4 th Defendant at a cost of ZMW927,571.95. The !51 Defendant only conducted works on the contract amounting to ZMW634,200.78 and paid ZMW668,430.58 extinguishing in full the whole liability of the 4th Defendant's indebtedness to the 1 st Defendant leaving a balance due to the 4th Defendant for unperformed obligations. The 4 th Defendant was in fact forced to terminate the contract awarded to the 1 st Defendant for non performance and proceeded to complete the construction of those houses on its own at extra costs. Plaintifrs evidence [16] The Plaintiff called one witness Sitwala Hilda Kitane, the Head of Credit (PWl) who filed a witness statement that mirrored the averments in the statement of claim. [17] Jn cross-examination by Counsel for the 1 st , 2nd and 3rd Defendant, PWI confirmed there was a relationship between the I st Defendant with the 4 th Defendant arising from a trade finance facility from the Plaintiff and the borrower was the 1 st Defendant for the construction of 10 housing units by the 1 st Defendant on behalf of the 4th Defendant. PWl conceded one of the terms of the facility was that the repayment instalments would be from the proceeds from the 4 th Defendant. PWl stated that the default by the l51 Defendant was occasioned by the delay in payment from the 4th Defendant. [18] PWI conceded that by a letter dated 11 th March 2010 it reconfirmed the terms of the facility letter that the 4th Defendant would pay the instalments on the facility availed by the Plaintiff. As at 28th July 2010, the 4th Defendant confirmed owing the 1 st Defendant. JS I Page [19) PWI confirmed the facility was restructured on 10th August 2010 occasioned by the 4th Defendant's failure to pay the instalments. As at 29th May 2010, PWl stated that ZMW60,238.04 was owing to the Plaintiff. (20] PWl stated that as at 2nd June 2010 the 4th Defendant confirmed the value of the work it assigned to the l51 Defendant as ZMW447,677,314.00. PWI maintained that the sum of ZMW228,218.46 was never remitted to the Plaintiff [21] In cross-examination by Counsel for the 4th Defendant, when referred to page I of the supplementary bundle of documents, PWl agreed it was an instruction from the l51 Defendant to the 4th Defendant to remit funds to the Plaintiff. [22] When queried as to the amount of ZMWl 13,000.00 on 18th April 2010, PWJ could not confirm it was paid to the Plaintiff by the 4th Defendant. PW I stated she had no statement from 20 I O due to the system migration and the new system started from 31 st October 2011. The Plaintiff closed their case after the one witness. 1st, 2nd and 3rd Defendant's evidence (23] DWI was Andrew Nkosi a director in the P1 Defendant Company who testified on behalf of the 151, 2nd and 3rd Defendants. His witness statement was admitted as his evidence-in-chief with similar averments as in the filed defence. [24] In cross-examination by Counsel for the Plaintiff, DWI admitted he received financing from the Plaintiff and told the Court he had made repayments of ZMW135,000.00 but not in full though he had no suppmiing evidence to support this assertion. JG I p age [25] DWI explained that the system employed was for the 4 th Defendant to pay through the Plaintiff and the 1 st Defendant would issue receipts afterwards and counter check with the Plaintiff. [26] In further cross-examination by Counsel for the 4 th Defendant, DWI admitted that only the 1 st Defendant could mandate the 4th Defendant as to where funds would be paid to. In respect to the receipts issued by the pt Defendant dated 13th April 2010, DWI maintained it was done after it issued instructions to the 4th Defendant. DWI told the Court that on 5th June 20 I 0 after instructing the 4th Defendant a sum of ZMW80,043 ,489.00 was paid into the l51 Defendant's account held with the Plaintiff. [27] DWI maintained that the 4th Defendant remitted the money to the Plaintiff who would reduce the monthly principal and interest and the balance would be used by the 1 st Defendant. DWI maintained there were interim payments at stage levels which went through the Plaintiff and receipts would be raised each time. DWI told the Court a certificate of interim payment was made at each and every stage of the house and only on completion and hand over was a final account to be rendered. [28] DWI maintained instructions on payment to the 4th Defendant remained unchanged as payments were made through the Plaintiff but that the 4th Defendant defaulted because of their liquidity challenges. DWl stated that each time payment was due it was supposed to pay through the bank transfers. 4th Defendant's evidence [29] DW4 was Mirriam Zunduma a director of construction in the 4th Defendant's employ who filed a witness statement into Court. In cross examination by Counsel for the Plaintiff, she confirmed that the 1 st J7 IP age Defendant vide a letter dated 26th March 2010 instructed it to pay all proceeds due to the 1 st Defendant directly to the Plaintiff. DW4 testified the 4th Defendant did not make any payments to the Plaintiff but paid the 1 st Defendant through its account held in the Plain tiff bank. [30] When referred to a letter dated 2nd June 2010 from the Plaintiff, DW4 stated the outstanding balance stood at ZMW447,677,314.33 and confinned some of the money was paid. She stated that the proof of payment was through bank statements and receipts issued by the 1 st Defendant. However, she admitted that proof of payment was not C. available to the Court. [31] In further cross-examination by Counsel for the 1 sr, 2nd and 3rd Defendants, DW4 maintained that the 4th Defendant did not make any payment to the Plaintiff though she retracted and stated that the 4th Defendant made payments to the Plaintiff as averred in her witness statement. She denied the 1 st Defendant was availed a financing facility for purposes of undertaking construction project on behalf of the 4th Defendant. DW4 maintained the 4th Defendant had made part payment to the 1 st Defendant through the Plaintiff. ~ [32] In re-examination she stated that the 1 st Defendant was engaged by the 4th Defendant to construct houses and the 1 st Defendant was paid through the Plaintiff as the transfers were done through the Plaintiff bank. She reiterated there were receipts from the 1 st Defendant confirming there were transfers to the Plaintiff though she stated she had no statements before Court. She reiterated there were receipts from the 1 st Defendant confinning to the 4th Defendant monies received through the Plaintiff. [33] The parties herein filed written submissions which I shall refer to when necessary. JS IP age Analysis and determination [34] From the pleadings of the parties, the evidence led by the respective parties, arguments raised, written submissions the issues arising for determination are as follows: 1. Whether the 1 st, 2nd and 3rd Defendants are indebted to the Plaintiff. 2. Whether the irrevocable domiciliation of contract proceeds between discharged the 1 st Defendant's liability to the Plaintiff. Whether the 1 st and 4th Defendant made payments to the Plaintiff. Whether the Plaintiff is entitled to the reliefs sought. 3. 4. [35] I find as a fact that on 7th April 2010 the 1 st Defendant was availed a trade loan facility by the Plaintiff (pages I of the Plaintiffs bundle of documents). The tenor was 6 months and a credit line of ZMW476,500.00 was availed to the pt Defendant with interest at 19% per annum plus a spread of 6%. The security was domiciliation of receivables from the 4th Defendant through the Plaintiff, personal guarantees and indemnity from the 2nd and 3rd Defendants and a letter of set off. [36] Due to a default in payment by the 1 st Defendant, the trade loan facility was restructured on 10th August 2010 with similar condition precedents as the earlier facility of 7th April 2010. [37] The issue is whether the Defendants herein are indebted to the Plaintiff severally and jointly and how this liability, if any, arises. It is trite law that he who alleges must prove as guided by the Supreme Court in the case of Mohammed v Attorney-General SCZ Judgment No 26 of 1982(1). 1st and 4th Defendants J9 I Page [38] The Plaintiff claims jointly and severally from the 151, 2nd , 3rd and 4th Defendant. I shall first deal with the Plaintiff's claim against the I st and 4th Defendants simultaneously as their respective defences emanate from the letter of irrevocable domiciliation of contract proceeds. [39] The contractual obligations between the Plaintiff and I st Defendant emanate from a trade loan facility dated 10th March 20 I 0 which was restructured on 10th August 20 I 0 superseding the earlier facility. The restructured facility had the following terms: "Availability period: The funds will be made available upon meeting all condition precedent to approval. During the tenor of the facility you will be required to provide the Bank with the certificates on works done on a continuous basis. Repayment: Principal plus interest will be paid over eight months and payable in arrears on a monthly basis. The instalments will be paid from the proceeds from National Housing Authority and from other projects. " [40] In the restructured loan facility dated 10th August, 2010, the condition precedents were as follows: "11. SECURITY/SUPPORT: 1. Domiciliation of receivables from National Housing Authority through EZM. 2. Personal Guarantees from the directors jointly and severally {Andrew Nkosi and Bernadette Nkosi) 3. Assignment of receivables by Nobel Construction Limited" [ 41] According to the restructured facility, part of the terms and requirement of the trade loan facility required the I st Defendant to provide an executed JlO IP age document of domiciliation of receivables in respect of the 1 st Defendant's account held with the Plaintiff (page 9 of the Plaintiffs bundle of documents) which the 1 si Defendant did. It is not in dispute that the 1 si Defendant met the condition precedents as stipulated in the facility letter of 1Q1h April 2010 and 10th August 2010. [42] The salient part of the assignment of receivables dated 10th April 2010 executed by the 1 st Defendant reads as follows: " l. JN CONSIDERATION of the LOANS CREDIT FACILITIES AND OTHER BANKING ACCOMODATION (hereinafter called "the Facilities") granted to us by you, ECOBANK ZAMBIA LIMITED (hereinafter referred to as "EZM") and by way of continuing security for all sums outstanding at any time under the said Facilities, WE NOBEL CONSTRUCTION LIMITED OF PERMANENT HOUSE 1sr FLOOR WING JJ27 CAIRO ROAD, LUSAKA, PO Box 310166 LUSAKA HEREBY ASSIGN to EZM and agree that you shall hold retain and have a lien upon all sales proceeds and receivables (hereinafter referred to as "the Receivables") due to us for all sums which we may from time to time be actually or contingently indebted or liable to you EZM under the Facilities. 4. WE HEREBY UNDERTAKE to make payments of all the Receivables into our Account No 110001381OJ15 at EZM in our joint names. 5. WE AGREE that the terms of this Assignment and the rights which shall accrue to you are: (i) That the Receivables are assigned as security for advances which shall from time to time be under this J11 I Page Facilities together with interest and all customary charges thereon. (ii) That your rights to realise the lien over the Receivables shall be exercisable immediately upon payment of any sums by our customers in our joint names and you may apply same in satisfaction of our indebtedness upon maturity of the Facilities. (iii) That in the event of default by us to discharge our as ~ per the date indicated in the commitment letter dated (t the J 5th April 20 JO and signed by the parties and/or after demand, any money or liability herein mentioned shall immediately become due. " [43] From a reading of the assignment of receivables, it is my understanding that any monies deposited into the l51 Defendant's account under the assignment of receivables were assigned to the Plaintiff who held a lien over the said amounts. The said assignment was also a continuing security which meant that its terms applied in the restructured facility of l 0th August 20 l O. It is not in dispute that it was a term of the deed of receivables that any monies received were to be applied to satisfy the I st Defendant's debt. (44] The 151 Defendant in paragraphs 3, 4, 5 and 6 of its defence alleges their failure to repay the facility was occasioned by the 4th Defendant breach of the irrevocable domiciliation of contract proceeds made in favour of the Plaintiff. In response, the 4 th Defendant testified that there was no privity of contract between it and the Plaintiff as far as the facility granted to the 151 Defendant was concerned. In paragraphs 7, 8 and 10 of the 1 st Defendant's defence it was pleaded as follows: J12 I Pa ge "7. The P1 Defendant admits the contents of paragraph 7 of the Plaintiff's statement of claim. The P 1 Defendant shall aver at trial that in breach of its agreement with the 1 t Defendant, the 411 ' Defendant failed or neglected to pay its contractual obligations to the P 1 Defendant through the bank account held with the Plaintiff. 8. The P1 Defendant denies the contents of paragraph 8 of the Plaintiff's statement of claim. The P 1 Defendant shall aver at trial that the failure to liquidate the loan facility was due to failure or neglect on the 4th Defendant to liquidate its indebtedness as per the agreement with the P 1 Defendant that culminated into the assignment of receivables. 10. The P 1 Defendant admits the contents of paragraph 10 of the Plaintiff's Statement of Claim and the JS1 Defendant shall aver at trial that the 4th Defendant has caused the JS1 Defendant loss by its continued failure and or neglect to settle its contractual obligations. " [45] This was resisted by the 4th Defendant in its defence as follows: "4. The 4th Defendant will aver at trial that the Agreement whereby funds were advanced if any to the Jst Defendant was private between the Plaintiff and Jst Defendant and did not include the 4th Defendant. [46] In determining if there is any liability to the Plaintiff by the 4th Defendant for the claimed amount, an important aspect is whether the letter of irrevocable domiciliation of contract proceeds is an assignment which binds the 4th Defendant. Counsel for the Plaintiff submitted that the arrangement was for the 4 th Defendant was to pay all money due to the Plaintiff from the 1 st Defendant through its account with the Plaintiff and J13 IP age not directly to the 1 st Defendant. It was canvassed that the 41 h Defendant was in breach of the agreement and it did not absolve them from liability to the Plaintiff and the 4th Defendant was bound by it. [47] It is the l51 Defendant's defence that the 4th Defendant admitted to domicile the receivables due to the I si Defendant on the contract with the 4th Defendant to the Plaintiff. By their failure to domicile the payment to the Plaintiff, it was DWl 's position that the 4th Defendant is liable for the debt owed by the 1 st Defendant to the Plaintiff. [48] On the part of the 4th Defendant, its contention is that any funds advanced, if any, to the 1 si Defendant was a private arrangement between the Plaintiff and 151 Defendant and it was not privy to it. The 4th Defendant further averred it obtained an overdraft to pay off its contractors including the l51 Defendant who was paid in full. DW4 testified that by acknowledging the assignment of contract proceeds in itself, it was not liable to pay or liquidate the loan advanced to the 1 st Defendant by the Plaintiff. DW4 further stated the 4th Defendant was merely acknowledging the 1 st Defendant as its contractor whom it had to pay for work carried out. According to the 4th Defendant, the irrevocable domiciliation of contract proceeds was a mere instruction of payment. [49] It is the duty of this Court to examine all the documents as a whole in order to determine what the respective parties' intentions were. In interpreting the documents, the approach I have taken is as per the learned authors Gerald McMeel "Construction of Contracts" 2nd Edition at page 150 at paragraph 4.04 where it stated that: "Jn the construction of all documents it is the duty of the Court not to confine itself to the force of a particular expression but to collect the intention from the whole instruments taken together. " J14 I Pa g e (t [50] Counsel for the Plaintiff submitted that the irrevocable domiciliation of contract proceeds was an assignment. In my exploration of case law, I came across a Nigerian case Julius Berger Nigeria Pie and Another v Toki Rainbow Community Bank Limited2019 LCN/4642 SC which is persuasive where the Supreme Court described the nature of domiciliation payments and effect of an assignment. [51] From the exposition of the law, an assignment is a legal term used in the context of the law on contract and property which means a right to ' - transfer and right to sue by a third party. It is not uncommon for a creditor (assignor) to transfer their right to receive payment of a debt (assignment) to a third party (assignee). In such an arrangement, the assignee will then seek payment from the debtor. The legal effect of a legal assignment is to put the assignee in the same position as the assignor in respect of benefits arising from the original transaction with the debtor. (52] The issue of the irrevocable domiciliation of contract proceeds is birthed from the letter dated 11 th March 2010 addressed to the Plaintiff from the 4th Defendant (page 59 of the 1 st Defendant' s bundle of documents). The letter states as follows: "The Head of Customer Services Quality, Ecobank Zambia Limited 22768 Thabo Mbeki Road PO Box 30705 Lusaka ATT: NSABILA MABINGO Dear Sir/Madam, RE: CONFIRMATION OF PAYMENTS THROUGH ECOBANK FOR NOBEL CONSTRUCTION LIMITED J15 IP age .. This is to confirm that Nobel Construction Limited has been given several contracts by NHA to build high cost and medium cost houses at our Twin Palm sites. The following are the plots numbers on which contracts have been awarded ............ .. . All payments for works done on the above houses for Nobel Construction Limited will be paid through Ecobank Zambia Limited. This arrangement has been requested by Nobel Construction Limited in order for them to meet your requirements for this application for trade financing facility with your bank. However, this does not absolve Nobel Construction Limited from its obligations to Ecobank nor transfer the obligation of Nobel Construction Limited to National Housing Authority. (underlined by the Court/or emphasis purposes only) This is merely to confirm that all payments to Nobel Construction Limited on above houses will be made direct to Ecobank Zambia Lirnited ". Yours faithfully BMBUZ! DIRECTOR OF PROJECTS FOR/ CHIEF EXECUTIVE [53] In my considered view, in the letter of I I th March 2010 the 4th Defendant made it crystal clear that the 1 st Defendant had the primary obligation to settle its indebtedness with the Plaintiff. The evidence on record shows the Plaintiff was fully aware of this letter and accepted it and proceeded to disburse the funds to the 1 st Defendant. The 4th Defendant categorically stated that the instruction was to merely confirm all J16 IP a ge payments to the I st Defendant on the subject house project to be directed to the Plaintiff. The evidence shows no other contrary intention where the Plaintiff challenges the contents of the letter dated 11 th March 2010. [54] I have also examined the contents of the letter dated 26th March 2010 from the pt Defendant to the 4th Defendant (page 1 of the Plaintiff's supplementary bundle of documents). It reads as follows: "The Director of Finance National housing Authority Chilufya Mulenga Road PO Box 50074 Lusaka Dear Mr Chanda, "RE: IRREVOCABLE DOMICILIATION OF CONTRACT PROCEEDS. Further to the purchase order, we hereby irrevocably domicile proceeds of the contract when due and payable to us to the following account: Bank Name: Ecobank Zambia Limited Bank Branch: Thabo Mbeki Account Name: Nobel Construction Limited Account Number: 1100013810115 We advise that this domiciliation instruction is irrevocable and unconditional unless you receive the written consent of Ecobank Zambia Limited. Yours faithfully, J17 IP age NOBEL CONSTRUCTION LIMITED" We National Housing Authority hereby agree to pay the said sums when due and payable to the above mentioned account it' in the alternative release the payment cheques for the contract to the duly authorised officers of Ecobank alone. " [55] The letter is duly signed by representatives of the 4th Defendant. Interestingly in the 4th Defendant's bundle of documents the second page where the 4th Defendant signed was not attached for reasons best known to the party. Again, the instruction from the 4th Defendant was to pay the sums of money as and when due and payable or release the cheques to the Plaintiffs authorised representatives. Both DWl and DW4 acknowledged the instruction from the 1 st Defendant to pay the Plaintiff as per letter of irrevocable domiciliation of contract proceeds dated 11 th March 2010 though the 4'h Defendant interpreted the said letter as a mere instruction. [56] Counsel for the Plaintiff argued that the 4th Defendant need not execute any of the trade loan facility agreements in order for liability to attach and canvassed the learned authors of Chitty on contracts Volume 1 General Principles at paragraph 19-021 as follows: "An assignor can assign a contractual right in equity in one of two main ways. He can inform the assignee that he transfers the chose to him or he can instruct the debtor to discharge the obligation by payment to, or performance of the assignee. Thus an agreement by merchants with a bank that payment for goods sold by the merchants should be remitted directly by the purchaser to the Bank has been held to constitute a valid equitable assignment of the amounts to the Bank. On the other hand, a mere direction by a creditor to his debtor to pay money to a third party is not J18 I P a ge • .. necessarily an assignment for such a direction may be nothing more than a revocable mandate to the debtor. So where a person who was overdrawn at his bank directed his debtor to pay sums due to him directly to the credit of his account at the bank, this was held not to be an assignment but a mere revocable mandate. Where similar instructions were given in another case but were expressly declared to be irrevocable save with the consent of the Bank, it was held that an assignment had been made. " [57] In order for the letter dated 11 th March 2010 from the 4th Defendant to the Plaintiff to be considered as either a legal or equitable assignment, it must put the assignee in the same position as the assignor in respect of the benefits arising from the trade loan facility with the 1 st Defendant. I am of the settled mind that the irrevocable domiciliation arrangement did not in any way relieve the 151 Defendant as the primary borrower from repaying the Plaintiff as clearly specified in the terms of the trade loan facility and deed of receivables. For the foregoing reasons, I do not accept the Plaintiffs contention that the irrevocable domiciliation of contract proceeds constituted an assignment whether legal or equitable. The excerpt from Chitty on contracts Volume 1 General Principles cited by Counsel for the Plaintiff are sound but inapplicable herein. [58] In attempting to free itself from the snares of the Plaintiff, the 4th Defendant's contended it was never privy to the trade loan facility between the Plaintiff and 1 s i Defendant. I agree with the 4th Defendant that it was not privy to the trade loan facility and made its intention known to the Plaintiff that the 1 si Defendant would not be relieved of its obligations to the Plaintiff under the trade loan facility. [59] The principles on privity of contract are well known and apply herein in that it is only the contracting parties to a contract that know what their J19 1 Page .. respective enforceable rights and obligations are and this burden cannot be shifted to a non-party to a contract as elucidated in the old English case of Dunlop Pneumatic Tyre Co Limited v Selfridge and Company Limited [1915 JA C 847 which is of persuasive value. [60] In view of my earlier findings, the Plaintiff cannot have a fall-back position and conveniently gravitate towards the 41 h Defendant as a point of recovery for the amount claimed. Similarly, this finding has a domino effect on the 1 si Defendant's defence which crumbles as I reject the 1 st Defendant's contention that the 4th Defendant is liable to make repayments to the Plaintiff on its behalf as the same is misconceived moreso that the 41 h Defendant was not privy to the trade loan facility. For the avoidance of doubt, the Plaintiffs claim against the 4th Defendant is without merit and fails. (61] The next issue for determination is whether the Plaintiff has proved its claim against the 1 si Defendant. The Plaintiff pleaded in its statement of claim under paragraph (i) that: "And the Plaintiff claims: (i) Against the JS', 2nd and 3rd Defendants jointly and severally payment of the sum of K476,500.00 being money owed to the Plaintiff as at 3JS1 October 2010 as a consequence of default by the JS' Defendant on repayment of the loan facilities." [62] PWI testified that no payments had been recovered from the 1 si and 4u, Defendants. A perusal of the defence shows that in paragraph 4, the 151 Defendant does not deny it was availed a loan facility specifically for the financing of the 41 h Defendant' s project for supply of goods and services J20 IP age .. which services were confirmed in writing by the 4th Defendant to the Plaintiff. [63] As to whether amounts were paid towards reducing its indebtedness to the Plaintiff, DWl testified that receipts were issued for monies transferred by the 4th Defendant who paid the l51 Defendant through the Plaintiff bank and issued receipts acknowledging payment of the said amounts. DWl clarified that the 4th Defendant owed the pt Defendant a ,e substantial amount of money even before the loan facility. Even though DWI insisted a total of ZMW135,000.00 had been paid to the Plaintiff, he conceded he had no proof to support this assertion. [64] In respect to payments allegedly made to the pt Defendant, DW4 at paragraph 8, 9, 11, 12 and 15 of her witness statement averred that the 4th Defendant had paid K90,605.24 on 26th May 2009 (page 65 of the Defendant's bundle of documents) a total sum of Kl 81,846.35 on 28th January 2010 (page 29 of the 4th Defendant's bundle of documents), K68,544.92 on 10th December 2009. These payments if at all made are immaterial as they were made prior to the trade loan facility of I 0th April 2010. [65] DW4 further averred that after the granting of the trade loan facility to the pt Defendant, a payment of Kl 13,312.67 was made on 13 th April 2010 (page 61 of the 4th Defendant's bundle of documents), K70,345.89 on 16th April 2010 (page 63 4th Defendant's bundle of documents); K80,043.48 on 6th October 2010 (page 64 of the 4th Defendant's bundle of documents); K50,480.46 on Ith September 2010. I am of the settled mind that all these payment allegations are unsubstantiated and I attach no weight to it. J21 I P age [66] DW4 referred to receipts dated 13 th April 2010 and 15th June 2010 issued by the l51 Defendant acknowledging receipt of monies (page 61 and 64 of the l51, 2nd and 3rd Defendants bundle of documents). The fact that receipts issued showed a transfer through the 1 st Defendant's bank account held at the Plaintiff bank, I am disinclined at face value to believe it as I am not convinced that the alleged payments were in fact made and paid into the 1 st Defendant's account. I say so as the 1 st Defendant should have had bank statements to prove the inflows into their account. In this respect, the onus was for the 1 st Defendant to substantiate its claim of the said payments from the 4th Defendant as having been paid into its account. [67) In respect to the statement of account, PWl was queried as to why it only showed entries from October 2011, and she attributed this to a migration from globus to the flexi system. A careful scrutiny of the account shows an outstanding balance as at 3 l51 October 2011 of Kr47,231,636.68 (ZMW 472,316.36) which evidence the 1 st Defendant failed to discredit. I find the Plaintiffs evidence credible as it is backed by documentary evidence namely the entries in the statement of accounts relating to the 1 st Defendant's account held at the Plaintiffs bank (page 23 of the Plaintifrs bundle of documents). [68) After all is said, I am satisfied when considering the evidence of PWl read together with the documentary evidence alluded to in the earlier part of this Judgment when taken as a whole, I find there is sufficient evidence adduced by the Plaintiff to prove its claim against the 1 st Defendant in the sum of ZMW476,500.00 as endorsed on the writ of summons. J22 IP age 2nd and 3rd Defendants (69] The Plaintiff claims against the 2nd and 3rd Defendants as guarantors. It is not in dispute that the execution of a personal guarantee by the 2nd and 3rd Defendant was a condition precedent and security for the trade loan facility. [70] Therefore, what remains to be ascertained is whether the Plaintiff is entitled to payments from the 2nd and 3rd Defendants pursuant to the personal guarantees and indemnity. The 2nd and 3rd Defendants in paragraph 9 of their defence denied that they had neglected or failed to liquidate the 1 st Defendant's indebtedness to the Plaintiff notwithstanding the demand from payment made by letter dated 27th August 2012. (71] The law relating to guarantees is well settled in that a contract of guarantee is an accessory contract by which the surety undertakes to ensure that the principal performs the principal obligations. It has been described as a contract to indemnify the creditor upon the happening of a contingency namely the default of the principal to perform the principal obligations. I agree with the learned authors Chitty on contracts, Volume II Specific Contracts at paragraph 44-001 cited by Counsel for the Plaintiff that: "A contract of guarantee is in essence a contract by which one person (the guarantor) agrees to answer for some liability of another (the principal debtor) to a third person (the creditor). A guarantor does not only merely undertake to perform if the principal debtor fails to do so, he undertakes to see that the principal debtor will perform. In particular it means that a guarantor is normally liable to the same extent as the principal debtor for damages for breach of the principal 's debtor 's J23 IP age obligations even though he has not in terms guaranteed the payment of damages. " (72) In construing the meaning of the personal guarantee and indemnity, I refer to Timothy N Parson and J R Lingard "Banking Security Documents" 6th Edition London: Butterworth which states as follows: "What bankers want is a clear undertaking that if they provide facilities to the customer, a third party of substance will see them paid. Jn such circumstances, the customer would be the principal debtor .... Whether an obligation is a guarantee or constitutes a prima,y liability is a question of construction, but the court will base its decision on the substance of the transaction not the form. " (72] Clause I of the personal guarantee and indemnity specifies the liability of the 2nd and 3rd Defendant as follows: " I . I/we jointly and severally) irrevocably and unconditionally guarantee payment to you on demand of all sums which now are or at any time hereinafter may become due (whether at maturity, due to payment, default in the terms of the facilities, acceleration or otherwise) or owing to you on account or in whatsoever capacity together with all interests, commissions, charges, costs and expenses until the date of full repayment." (73] It is clear from clause I cited above and as rightly observed by Counsel for the Plaintiff that in the event of default by the I st Defendant, the 2nd and 3rd Defendants shall be jointly and severally liable to the Plaintiff pursuant to the personal guarantee and indemnity (page 6 of the Plaintiff's bundle of documents). The personal guarantee and indemnity places the 2nd and 3rd Defendant on an equal footing as the I st Defendant in terms of liability to the Plaintiff, upon default. It is rather J24 IP age • misconceived for the 2nd and 3rd Defendant in paragraph 6 of the defence to allege that the personal guarantee was an academic exercise as the liability was extinguished by the 4th Defendant meeting its contractual liability to the 1 s1 Defendant through the account held with the Plaintiff. This avennent cannot hold having found that the 4th Defendant is not liable to the Plaintiff. [74] Following the default of the 1 st Defendant, the evidence shows that the Plaintiff made a written demand on the 2nd and 3rd Defendant (page 21 of the Plaintiff's bundle of documents). Without much ado, I need not belabour the point and find the personal guarantee and indemnity are enforceable against the 2nd and 3rd Defendants. Disposal [75] From the totality of the evidence before me and on a balance of probabilities, I find in favour of the Plaintiff and enter Judgment against the P1 Defendant in the claimed sum of ZMW476,500.00. The Judgment sum shall attract contractual interest from the date of the writ until Judgment and thereafter at the commercial lending rate as determined by Bank of Zambia until full payment. [76) In default of payment by the 1 st Defendant, the Plaintiff shall be at liberty to enforce the personal guarantees and indemnity against the 2nd and 3rd Defendants for the Judgment sum and interest specified in paragraph 75. [77] The Plaintiffs claim for an order against the 4th Defendant to pay over all the contractual proceeds due to the I s1 Defendant and still in its possession fails in its entirety on account of a lack of merit and is accordingly dismissed. Costs to the Plaintiff to be paid by the I 51, 2nd and 3rd Defendants the same to be agreed, and in default, taxed. J25 IP age Costs awarded to the 4th Defendant to be borne by the Plaintiff, the same to be ir • agreed and in default, taxed. Leave to appeal granted. Delivered at Lusaka this 23rd day of April 2020. IRENE ZEKO MB WE HIGH COURT JUDGE J26 IP age