Finance Bank Zambia Limited v Sidik Valli Patel T/A Libala Stores and Anor (Appeal No. 40 of 2009) [2011] ZMSC 42 (17 June 2011)

. - IN THE SUPREME COURT OF ZAMBIA HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: J1 APPEAL NO. 40 OF 2009 FINANCE BANK ZAMBIA LIMITED AND SIDIK VALLI PATEL T/A LIBALA STORES JUDITH HAMALUBA APPELLANT 1 ST RESPONDENT 2ND RESPONDENT CORAM: CHIRWA, MWANAMWAMBWA AND WANKI, JJS On 1st February, 2011 and 17th June, 2011 For the Appellant: For the 1st Respondent: For the 2 nd Respondent: Mr. A. Roberts of Messrs Finance Bank N/A Mr. M. L. Mukande of Messrs Mukande and Company JUDGMENT WANKI, JS, delivered the judgment of the Court. Cases referred to:- 1. Bank of Zambia -Vs- Aaron Chungu, Access Leasing Limited and Access Financial Services Limited (2008) 1 ZR page 161. 2. New Plast Industries -Vs- Commissioner of Lands and Attorney General (2001} ZR 51. 3. Ludwig Sondashi -Vs- Godfrey Miyanda (1995-97) ZR page 2. 4. Zambia Consolidated Copper Mines Limited -Vs- Joseph David Chileshe, (2002) ZR 86, 93. 5. Development Bank of Zambia and Another -Vs- Sunvest Limited and Another, (1997) ZR 187. 6. The Attorney General -Vs- Aboubacar Tall and Zambia Airways Corporation Limited, (1995-1997) ZR 5. Other Works referred to:- J2 7. Halsbury Laws of England Volume 20, paragraph 180 page 115; paragraph 215 page 138 and paragraph 159. 8. Paget's Laws of Banking 8 th Edition (Megraph and Ryder, pages 618 to 619. 9. Odgers' Principles of Pleadings and Practice in Civil Actions in the High Court of Justice, 22nd Edition 1991. 10. 11. Rules of the Supreme Court of England and Wales, 1999 Edition, Order 15, Rule 4. High Court of Zambia Act, Chapter 27 Order 14 Rule (5) Sub Rule (1). The Appellant, Finance Bank Zambia Limited, being dissatisfied with the Ruling of the High Court, sitting at Lusaka on 30th January, 2009 in favour of the Respondents, Sidik Valli Patel T / A Libala Stores and Judith Hamaluba, appealed to this Court against the said Ruling. The facts leading to the appeal are that on 29th January, 2009, the Appellant which claimed to be the Mortgagee under the Equitable Mortgage, took out an action against the Respondents by way of an Originating Summons, pursuant to Order 30 Rule (14) of the High Court Rules in which it claimed for:- 1. Payment of all monies due to the Plaintiff on the account of the 1st Defendant under an Equitable Mortgage made between the Plaintiff on the one part and the 2 nd Defendant of the other part and such costs as would be payable if this claim were the only relief granted. 2. Payment of all the monies due on the account of the 1st Defendant for which the 2nd Defendant executed an Equitable Mortgage Deed as security for the said monies. 3. That in default of the Plaintiff and the Defendants agreeing on the amount due to the Plaintiff, an account may be taken of what is due J3 to the Plaintiff under and by virtue of the . said Equitable Mortgage Deed. 4. Delivery by the Defendant to the Plaintiff of possession of the said property charged under the said Mortgage or in the alternative an order for the sale of the said property. 5. Further or other relief. 6. Costs. The Summons was supported by an Affidavit in Support which read:- 5. That the 1st Defendant is a holder of an account with the Plaintiff and in June, 2006 the 1st Defendant applied for an overdraft facility of K250 million and the Plaintiff approved KlSO million of the amount applied for. Now produced and shown marked "CSl" and "CS2" are copies of the 1st Defendant's approval and respectively. the Plaintiff's application 6. 7 . 8. That on 3 rd August, 2006, the 2 nd Defendant wrote to the Plaintiff authorizing the 1st Defendant to use her property LOT 1727/M Lusaka as Security for the advance to the 1st Defendant and the said 2 nd Defendant executed an Equitable Mortgage to that effect which Mortgage was duly registered with the Lands and Deeds Registry. Now produced and shown marked "CSS" are copies of the letter for the 2 nd Defendant to the Plaintiff, a copy of the Certificate of Title for property in question and the Equitable Mortgage respectively. That as further security for the repayment of the monies advanced the 1st Defendant gave his Personal Guarantee by a letter which is now produced and shown marked "CS6". That the Plaintiff has not received the sum or any part thereof stated in Clause C of the next preceding paragraph of this Affidavit to be due under the Equitable Mortgage or any value in or towards satisfaction of the said sum. 9. That the state of account, between the parties, are as follows:- (a) Amount advanced under Equitable Mortgage in 2006: K150,000,000.00; J4 (b) Amount due as at 28th January, 2008: K249,332,633.97; (c) Interest continues to accrue at current bank rate. 10. That the Plaintiff did institute an action against the 1st Defendant for recovery of the monies owing under Cause No. 2007 /HPC/0287 and that judgment was granted in November, 2007, however the Plaintiff has failed to execute the said judgment as the 1st Defendant cannot be located. 11. That several demand notices for repayment of the outstanding sum have been served on the Defendants who have neglected and/ or failed to settle the outstanding sum. 12. That the Defendant's are liable for the amount due on the account are accordingly in default of their obligations under the Mortgage Deed although full particulars of the account have been furnished to them. The 2 nd Respondent filed an Affidavit in Opposition. In the Affidavit in Opposition, the 2 nd Respondent gave a long story of how she came to know the 1st Respondent and how she authorized him to use her property as security for the loan facility. She further stated that her authority was obtained under fraud; that she even reported the said fraud to the Police; and that the Bank was aware of her reluctance to agree to the mortgage. Before the hearing of the application on merits, Mr. Manda Mwitumwa, Counsel for the 2 nd Respondent raised a preliminary issue with regard to the judgment obtained by the Plaintiff against the 1st Respondent of November, 2007 under Cause No. 2007 /HPC/0287. After considering the preliminary issue; the submissions on behalf of the parties; and the guidelines in the case of DEVELOPMENT BANK OF ZAMBIA AND ANOTHER -VS SUNVEST LIMITED AND ANOTHER (5J, the Court below held that it JS was open for the Plaintiff (Appellant) to join the 2 nd Defendant (2nd Respondent) in the earlier action and do whatever was necessary, but they did not do so. They slept on their rights and the Court will not entertain another action over the same matter. This is an abuse of Court process, and viewed duly and with disapproval by the Courts. In view of the foregoing, the 2nd Defendant's application was granted with costs. The trial Court then proceeded to make an order dismissing the Plaintiffs action with costs to the 2 nd Defendant. In its Memorandum of Appeal that was filed on 3 rd March, 2009, the Appellant advanced two grounds of appeal: 1. The Lower Court erred both in law and fact by holding that as the Appellant had failed to execute the judgment obtained in default of appearance in the first action (2007 /HPC/0287) against the 1 st Respondent whose whereabouts are unknown, the Appellant's the subsequent mortgage proceedings subject of this appeal to enforce an equitable mortgage against the 2 nd Respondent was an abuse of Court process. (2008/HPC/0032) action. in to 2. The Lower Court erred by ruling that the Appellant ought to have applied to Cause No. 2007 /HPC/0287 in enforcing its equitable mortgage in an action commenced by Writ of Summons when such action could only be commenced by Originating Summons. the 2 nd Respondent enJ01n Further to the Memorandum of Appeal, the Appellant on 21 st January, 2011 filed Appellant's heads of arguments. It was indicated in the Appellant's heads of arguments that as the Grounds of Appeal were inter-related they were argued as one ground. J6 It was submitted that, the facts were not 1n dispute. The Appellants issued a Writ of Summons 1n Cause No. 2007 /HPC/0287 "the first action," against the 1st Respondent who was the principal borrower and a judgment in default of appearance and defence was entered for K235,536,830.58 on 12th November, 2007. However, the default judgment could not be executed as the 1st Respondent had disappeared and could not be traced. Subsequently, the Appellant in a bid at recovering its monies proceeded to enforce the equitable mortgage pledged by the 2nd Respondent by way of Originating Summons under Order 30 Rule 14 of the High Court Rules under Cause No. 2008/HPC/0032, "the second action." The Lower Court ruled that the second action was an abuse of Court process and that the Appellant ought to have applied to enjoin the 2 nd Respondent to the first action under provisions of Order 14 Rule 4 of the High Court Rules. The questions which must be answered by the Court:- 1. The first question is assuming that the Appellant had enjoined the 2nd Respondent to the first action commenced by Writ of Summons, would the Appellant as mortgagee have been entitled to enforce its rights as a mortgage under an action commenced by Writ of Summons? The answer would be in the negative as Order 30 Rule 14 of the High Court Rules clearly provides that an action to enforce payment of monies secured by a legal or equitable mortgage or for sale, foreclosure and delivery of possession of mortgaged property is by way of Originating Summons. The Court was referred to the Supreme Court holding in the BANK OF ZAMBIA -VS- AARON CHUNGU, ACCESS LEASING LIMITED AND ACCESS SERVICES LIMITED, (1l page 161 :- J7 "It is not correct that the mode of commencement of any action depends on the relief sought. The correct position is that the mode of commencement of any action is generally provided for by statute." A similar stance was taken by this Court in NEW PLAST INDUSTRIES -VS- COMMISSIONER OF LANDS AND ATTORNEY GENERAL, (2) "Our statutes are clear that commencement of mortgage actions are to be by way of Originating Summons and not, by Writ of Summons." 2. The second question is can a Writ of Summons be amended or "converted" into an Originating Summons? In LUDWIG SONDASHI -VS- GODFREY MIYANDA, (3 l this Court allowed an application to amend judicial review proceedings as if the action had been commenced by way of writ because a specific provision in the editorial notes on Judicial Review to the white book provided for such an amendment. The Court was further referred to its holding 1n the case of ZAMBIA CONSOLIDATED COPPER MINES -VS- JOSEPH CHILESHE. (4l It was further submitted that the first action, 2007 /HPC/0287 was for recovery of the debt whereas the second action, 2008/HPC/0032 related to enforcement of an equitable mortgage over LOT Number 1727 /M/Lusaka. The mortgage claim was an entirely new claim altogether. It was pointed out that paragraph (3) of Rule 5 deals with alteration of the name of a party; paragraph (4) deals with alteration of the capacity in which a party sues; paragraph (5) deals with J8 adding or substitution of a new cause of action. It was submitted, that the substitution of a new cause of action can only be done if the new cause of action can be commenced by Writ of Summons. It was contended that an amendment of a Writ of Summons simply means amendment of its contents, such as parties, nature of claim, cause of action etc., but is not a substitution of the writ with another originating process. It was argued that, there was no abuse of process by the Appellant, opting to proceed against the 1st Respondent. In support, the Court was referred to Order 14 Rule 4 of the High Court Rules, Chapter 25 of the Laws of Zambia. It was contended that the words "it is not necessary -"(in Order 14 Rule 4) mean that the options are available to the creditor in the manner in which he shall seek to recover his money. The Court was referred to HALBURY LAWS OF ENGLAND,, Volume 20 para graph 180 at page 115 !7l wherein the learned authors state, the liability of the surety is secondary, that is to say, it does not arise until the principal debtor has made a default; on the other hand, a guarantor is no more justified in placing the whole of his property out of the reach of liability to pay the guaranteed debt than if he were the principal debtor. The Court was further referred to HALBURY LAWS OF ENGLAND Volume 20 paragraph 215 page 138 (7J which, provides inter alia that, the principal debtor and the guarantor may, but need not, be sued in the same action. J9 The Court was further referred to PAGET'S LAWS OF BANKING BTH EDITION (MEGRAPH AND RYDER) pages 618 to 619. (8) It was further submitted that in a nutshell a secured creditor has the discretion to decide which course of action to take in recovering its monies. Provided there is default by the principal borrower, the creditor can opt either to proceed solely against the primary borrower or the surety or simultaneously against both. It was finally submitted that there was no abuse of process as the 2 nd Respondent who is a party to the second action was not a party to the first action and neither was the mortgaged property a subject of the first action. In addition to the Appellant's heads of arguments, Mr. Roberts on behalf of the Appellants made submissions when the appeal came up for hearing. The learned Counsel submitted that this appeal relates to Civil Procedure. The facts are not in dispute. The question is whether a Writ of Summons can be used to enforce mortgage proceedings. The procedure for enforcement of mortgages is provided 1n Order 30 of the High Court Rules, Chapter 25 of the Laws of Zambia. The learned Counsel further submitted that the first action was by Writ of Summons against the principal borrower. They did not sue the 2 nd Respondent. It was only after the disappearance of the principal borrower that the 2 nd Respondent was sued to recover the loan. They proceeded by Originating Summons. J10 On behalf of the 2 nd Respondent heads of arguments were filed on 26th January, 2011. In response to ground one, it was submitted that the Lower Court was on firm ground when it held that this action amounted to multiplicity of action and abuse of Court process. It was further submitted that it was not in dispute that the Appellants commenced an action against the 1st Respondent and actually obtained a judgment for all the monies outstanding on the Loan Agreement. It was further not in dispute that the facts and cause of action under Cause No. 2007 /HPC/0287 are the same as under Cause No. 2008/HPC/0032. It was argued that the only ground the Appellant wished to rely on in support of commencing a fresh action and this appeal is the fact that Cause No. 2007 /HPC/0287 was commenced by Writ of Summons while this cause was commenced by way of Originating Summons. It was submitted that the law on guarantees/surety-ship is well settled. The liability of surety arises the moment the principal debtor defaults. There is no requirement that the creditor ought to pursue or sue the principal debtor before proceeding against the surety. In support, the Court was referred to HALSBURY'S LAWS OF ENGLAND Volume 20, paragraph 159. (7 ) It was contended that the Plaintiffs at all material times were well aware of the purported equitable mortgage and at all material times they knew the procedure and mode of commencement of Jll mortgage actions. Contrary to this, they with full knowledge of this commenced action by way of Writ of Summons. Upon realizing their mistake, the rules of Court now prevents them from re-litigating over the same facts and cause of action. There is no valid reason why the Appellant chose a wrong mode of commencement of a mortgage action, it is their mistake and they should bear the consequences. It was submitted that while they agreed that our rules provide specific mode of commencement for specific actions, when it comes to the question as to whether there is multiplicity and abuse of process of Court that is irrelevant. The test to be applied is whether or not the two actions are based on the same facts cause of action and seek the same relief. In their heads of arguments the Appellant has argued that the first action sought to recover money while the second was to enforce the mortgage. These are two sides of the same coin. Ultimately what the Appellant is interested in is the recovery of the monies advanced to the 1st Respondent and nothing more. It was further submitted that the Appellant has failed to address the Lower Court's concerns about the danger of delivering contradictory judgments. Mr. Sidik Valli Patel is a party to both the 1st and 2 nd actions commenced in the High Court and ultimately the Appellant is going to end up with two judgments against the same party and on the same issue. Whilst it was admitted that a creditor is at liberty to pursue all remedies possible in pursuit of his J12 debtors, such pursuit should be done within the rules of the Court and not anyhow. It was argued that irrespective of mode of commencement, re litigation over the cause of action is abuse of process of the Court and the Court has power to struck out or dismiss the subsequent action. In support, the Court was referred to ODGER'S PRINCIPLE S OF PLEADINGS AND PRACTICE, 22ND EDITION PAGE 150, (9) and the Court's holding in the case of DEVELOPMENT BANK OF ZAMBIA AND ANOTHER -VS- SUNVEST LIMITED AND ANOTHER. {5l It was submitted that the Appellants ought to have raised all issues over the matter under Cause No. 2007 /HPC/0287. There was a very high risk that had the Lower Court decided to delve into the merits of the case, the Court could have come up with contradictory judgment. In response to ground two, it was submitted that this ground ought to fail. The underlying principle is to prevent multiplicity of actions. It is to ensure that parties likely to be affected by the judgment are brought before the Court to prevent future litigation over the same issues. The Court was referred to Order 15, Rule 4 of the Rules of the Supreme Cou rt, 1999 Edition ; (lO) and Order 14 Rule 5 ( 1) of the Rules of the High Court, Chapter 25 of the Laws of Zambia, (11 ) and the case of THE ATTORNEY GENERAL -VS- ABOUBACAR TALL AND ZAMBIA AIRWAYS LIMITED. (6l It was further submitted that from the foregoing authorities, the Court below was on firm ground when it held that joinder was J13 the proper course of action that the Appellant should have taken as opposed to commencing a fresh action over the same issues. There is no proper legal ground why the Appellant did not heed the trial Judge's direction by applying for joiner of a party under Cause No. 2007 /HPC/0287. It was finally submitted that on the foregoing, this appeal be dismissed with costs to the 2 nd Respondent. In his submissions, Mr. Mukande repeated what is contained in the 2nd Respondent's heads of arguments. We have considered the grounds of appeal; the arguments in support and against the grounds of appeal, and authorities. We have examined the ruling appealed against. In the first ground, the Appellant has attacked the trial Court for holding that, as the Appellant had failed to execute the judgment obtained in default of appearance in the first action (2007 /HPC/0287) against the 1st Respondent whose whereabouts are unknown, the Appellant's subsequent mortgage action (2008/HPC/0032) in the proceedings subject of this appeal to enforce an equitable mortgage against the 2 nd Respondent was an abuse of Court process. In support of the first ground, after referring to a number of authorities, it was argued on behalf of the Appellant that there was no abuse of process by the Appellant, opting to proceed against the 1st Respondent before it proceeded against the 2 nd Respondent. To re-enforce the argument, the Court was referred to Order 14, Rule 4 of the High Court Rules, (11 ) which provides:- J14 "Where a person has a joint and several demand against two or more persons, either as principals or sureties, it is not necessary for him to bring before the Court as parties to a suit concerning that demand all the persons liable thereto, and he may proceed against anyone or more of the persons severally or jointly and severally liable." It was contended that the words, 'it is not necessary"- ', mean that the options are available to the creditor in the manner in which he shall seek to recover his money. It was submitted that the 2 nd Respondent was not a party to the first action. On behalf of the 2 nd Respondent it was submitted that the Lower Court was on firm ground when it held that this action amounted to multiplicity of action and abuse of Court process. It is common to the parties that the Appellant commenced the first action against the 1st Respondent claiming for money lent (which was within Order 14) and obtained a judgment in its favour; that the 2 nd Respondent was not a party to that action; and that the Appellant later commenced the second action against both the 1st and 2 nd Respondents. Before the second action was however considered on its merits, a preliminary point was raised on behalf of the 2nd Respondent which preliminary point was upheld resulting in the Ruling appealed against dismissing the action based on the principle laid by this Court in the case of DEVELOPMENT BANK OF ZAMBIA AND KPMG PEAT MARWICK -VSR SUNVEST LIMITED AND SUN PHARMACEUTICALS. t5l JlS There is no doubt that the action by the Appellant against the 1st Respondent against whom it had obtained a judgment in the first action was an abuse of the Court process. However, the question that we have to consider is whether the commencement of the second action against the 2 nd Respondent who was not a party in the first action could be said to be an abuse of the Court process. In the DEVELOPMENT BANK OF ZAMBIA (5l case referred to above, the borrowers who were the Respondents in the action numbered 1995/HN/307 commenced an action numbered 1995/HN/ 1394 in which they applied for an injunction to restrain the Bank (Plaintiff) from appointing the receiver. The Court there decided that:- "We also disapprove of the multiplicity of actions between the same parties involving various issues proposed to be raised in the new action which as we said we disapprove of -. " In this case, the 2 nd Respondent was not a party in the first action. Therefore, the disapproval that was expressed by this Court cannot apply. The two cases can therefore be distinguished. In the DEVELOPMENT BANK OF ZAMBIA (5l case, both the Plaintiffs and the Defendants were parties in both actions. In the present case, the 2 nd Respondent was not a party to the first action. As the 2 nd Respondent was not a party in the first action, we do not see why the second action against her could be said to be an abuse of the Court process. Further, as the claim against her was for enforcement of the equitable mortgage, we do not see how the judgment against her in the second action could be in conflict with J16 the judgment obtained against the 1st Respondent 1n the first action. In the circumstances, we have found that the Court below misdirected itself when it upheld the preliminary point as it related to the 2 nd Respondent and when it dismissed the second action against her. The first ground has merits as it relates to the 2 nd Respondent and is accordingly allowed. In relation to the 1st Respondent, we have found that ground one has no merit and is accordingly refused. In ground two, the Appellant has attacked the trial Court by ruling that the Appellant ought to have applied to enjoin the 2 nd Respondent to Cause No. 2007 /HPC/0287 in enforcing its equitable mortgage. It was argued that enjoining of the 2 nd Respondent to the first action that was commenced by Writ of Summons, would have been inappropriate considering that Order 30, Rule 14 of the High Court Rules, Chapter 27 of the Laws ofZambia, (11l provides that an action to enforce payment of monies, or legal or equitable mortgage or for sale, foreclosure and delivery of possession of mortgaged property is by way of Originating Summons. In support of the argument, the Court was referred to its holding in the case of NEW PLAST INDUSTRIES -VS- THE COMMISSIONER OF LANDS AND THE ATTORNEY GENERAL (2l that:- J17 "(i) It is not entirely correct that the mode of commencement of any action largely depends on the reliefs sought. The correct position is that the mode of commencement of any action is generally provided by the relevant statute." The Court was further referred to its holding 1n the case of BANK OF ZAMBIA -VS- CHUNGU AND OTHERS (1) in which the above case was referred. In response, it was argued that the underlying principle for joinder is to prevent multiplicity of actions, and to ensure that parties likely to be affected by the judgment are brought before the Court to prevent future litigation over the same issue. In support of the foregoing argument, the Court was referred to Order 1 5 , Rule 4 of the Suprem e Court Rules , 1999 Edition, (10l and Order 14 Rule 5 (1) of the High Court Rules, Chapter 27 of the Laws of Zambia (11l; and the case of ATTORNEY GENERAL -VS ABOUBACAR TALL AND ZAMBIA AIRWAYS. (6) We have considered the heads of argument, the submissions, and the authorities referred to and we have examined the Ruling appealed against. We have found that the commencement of a mortgage action is prescribed in Order 30 Rule 14 of the High Court which provides: "Any mortgage or mortgagor, whether legal or equitable, or any person entitled to or having property subject to a legal or equitable charge, or any person having the right foreclosure or redeem any mortgage, whether legal or equitable, may take out as of course an Originating Summons returnable in the chambers of a Judge for such relief of the nature or kind following as may be the summons be specified, and as the circumstances of the case may require payment of monies secured by the mortgage or charge; sale; fore closure; delivery of possession (whether before or after foreclosure) to the mortgage or person entitled to the charge by the mortgagor or J18 person having property subject to the charge or by any other person in, or alleged to be in possession of the property; redemption; re-conveyance; delivery of possession by the mortgage." In the case of NEW PLAST INDUSTRIES -VS- THE COMMISSIONER OF LANDS AND THE ATTORNEY GENERAL (1l this Court held that:- "The correct position is that the mode of commencement of any action is generally provided by statute. This, where a statute provides for the procedure of commencing an action, a party has no option but to abide by that procedure." The second action was commenced pursuant to the procedure prescribed by statute, whereas the first action was commenced by Writ of Summons. Therefore it would have been inappropriate and contrary to the procedure prescribed for the second action to be enjoined to the first action. That being the case, we hold that the trial Court erred by ruling that the Appellant ought to have applied to enjoin the 2 nd Respondent to Cause No. 2007 /HPC/0287 in enforcing its equitable mortgage in an action commenced by Writ of Summons when such action could only be commenced by Originating Summons. The second ground has merits and is accordingly allowed. In the circumstances, the appeal is found to lack merit as it relates to the 1st Respondent and is accordingly dismissed. As the appeal relates to the 2 nd Respondent, we have found that the appeal has merit and is accordingly allowed. The Order dismissing the second action is set aside. The case is referred back to the High Court for retrial. We however, advise that the second action be amended by removing the 1st Respondent and the claims J19 against him. We order no costs. ~~\ ... ......... ... . ~\, ~ .. .............. . D. K. Chirwa, SUPREME COURT JUDGE ~ ... /Y(l~ .......... . M. E. Wanki, SUPREME COURT JUDGE ' DGE "E;J;!§i 11 :tT: flffl«> I - - -- _ ·....:_· - •· -- - - - ---· - - . - - · - -~ - - - ---- - - ~ ~.......i':..::,___~':b- ------ - - - - . ~ . -- ~- . - . -=-- - --· - :,_·_::... -- , . ·---. -- -_=---_-