First National Bank Zambia Limited v Crescent Future Kids Limited and Others (HPC 89 of 2016) [2016] ZMHC 139 (30 June 2016)

IN THE HIGH COURT FOR ZAMBIA 2016/HPC/0089 AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (CIVIL JURISDICTION) IN THE MATTER OF IN THE MATTER OF IN THE MATTER OF: BETWEEN: ~ .. 3 U JUN 20\6 l COMMERCIl\lREG;O'"' p " C""~~ U~ N UNDER ORDER 30 AN A RULE OF THE HIGH COURT RULES, CHAPTER 27 OF THE LAWS OF ZAMBIA. THE PROPERTY COMPRISED FIRST LEGAL MORTGAGE RELATING TO SID NO. 44 OF SID "D" OF SID NO. 1 OF SID LUSAKA IN THE NAME OF CRESCENT "A" OF FARM NO. IN A FUTURE KIDS LIMITED. FORECLOSURE, SALE OF THE MORTGAGED PROPERTY POSSESSION AND FIRST NATIONAL BANK ZAMBIA IMITED PLAINTIFF AND CRESCENT FUTURE KIDS LIMITED EPHRAIM DAN SIMUKONDE MWEEMBA MUUKA 1ST RESPONDENT 2ND RESPONDENT 3RD RESPONDENT -)1- +, JUDGMENT Before the Honourable Mr. Justice W. S. Mweemba in Chambers at Lusaka. For the Applicant Ms. B. M. Siakumu - In House Counsel - First National Bank (Z)Limited. For the Respondents Mr. P. Songolo - Messrs Philsong & Partners. CASES REFERRED TO: 1. Stanley V Wild (1899) 474. 2. Reeves Malambo V Patco Agro Business Industries Limited SCZ Judgment No. 20 of 2007. 3. Kasengele V Zambia National Commercial Bank - SCZ Judgment No.110f2011. LEGISLATION REFERRED TO: 1. Order 30 Rule 14 of the High Court Rules, Chapter 27 of the Laws of Zambia. 2. Halsbury's Laws of England Volume 32, paragraph 402. 3. Order 88 Rule 5 (13) of the Rules of the Supreme Court, White Book (1999 Edition). 4. Order 21 Rule 7 of the High Court Rules, Chapter 27 of the Laws of Zambia. The Applicant First National Bank Zambia Limited by way Originating Summons has applied pursuant to Order 30 Rule 14 of -J2- the High Court Rules, Chapter 27 of the Laws of Zambia against the Respondents for the following reliefs: 1. Payment of all monies which as at 17th Febnwry, 2016 stood at K1,580,334.85 plus contractually agreed interest, costs and all other charges due and owing to the Applicant Bank by the 1st Respondent under facilities availed to the 1st Respondent and secured by a First Legal Mortgage over Subdivision No. 44 of Subdivision "D" of Subdivision No. 1 of Subdivision "A" of Farm No. 687, Lusaka (the Mortgaged Property) property registered in the name of the 1st Respondent; 2. An Order to foreclose on the Mortgaged Property; 3. Delivery of vacant possession of the Mortgaged Property by the 1st Respondent to the Applicant; 4. An Order of Sale of the Mortgaged Property by the Applicant; 5. An Order for the enforcement of the Guarantee/ Suretyship signed by the 2nd and 3rd Respondents; 6. Costs; and 7. Any other relief the Court shall deem fit. According to the supporting Affidavit sworn by Euphrice Kombe filed into Court on 29th February, 2016 the 1st Respondent was by Facility Letter dated 22nd July, 2013 availed Credit Facilities which included an Overdraft Facility in the sum of K560,000.00. By Facility Letter dated 6th December, 2013 the 1st Respondent was availed a short term Overdraft/Letter of Credit Facility of K1,000,000.00. By Facility Letter dated 1st August, 2014 the 1st . J3. Respondent was availed further Credit Facilities which included another Overdraft Facility of K1,000,000.00. By an Addendum dated 20th October, 2014 and duly executed by the parties, changes regarding security held under the Facilities were effected. The interest agreed was at the Bank of Zambia Monetary Policy Rate then 9.75% plus a margin of 9% and later at the Bank of Zambia Monetary Policy Rate of 12% plus the product of a margin of 9% (and a factor then at 1.78) bringing the effective rate of interest to 28%. The interest was calculatable daily on the daily debit balances and charged monthly In arrears. It was to be calculated on a daily basis on debit balances owing under the facilities notwithstanding that such balance may have been increased by the debiting of interest to such balance. The parties further agreed that any interest not covered monthly will be compounded at the aforesaid rate. As security for the facilities, the 1st Respondent executed a First Legal Mortgage over Subdivision No. 44 of Subdivision "D" of Subdivision NO.1 of Subdivision "A"of Farm No. 687, Lusaka. The Legal Mortgage was duly registered at the Lands and Deeds Registry. The facilities were further secured by Unlimited Suretyships/Guarantees provided by the 2nd and 3rd Respondents. The Overdraft Facilities were to expire after a period of 12 months from the date of draw down. -J4- The record will show that the Respondents Advocates did not file an Affidavitin Opposition. The record will also show that on 30th March, 2016 the Applicant- filed a Notice of Discontinuance wherein it wholly discontinued the action against the 3rd Respondent. The Applicant submits that the 1st Respondent has defaulted on the Credit Facilities and that the Respondents have failed to settle their indebtedness arising out of the Credit Facilities secured by a Legal Mortgage. The definition of a Mortgage as defined by Judge Lindley in the case of SANTLEY V WILDE (1) was cited. The said case defined a Mortgage as: "A mortgage is a conveyance of land or an assignment of chattels as security for the payment of a debt or the discharge of some obligation for which it is given". It is further submitted that HALSBURY'S LAWS OF EBGLAND VOLUME 32 at Paragraph 402, states that a mortgage consists of two things, namely a personal contract of a debt and a disposition or charge of the Mortgagor's estate or interest as security for the repayment of the debt. -J5- Order 30 Rule 14 of the High Court Rules, Chapter 27 of the Laws of Zambia empowers the Court to entertain the Applicants application. The Applicant submitted that as the Respondents have failed and/ or neglected to pay the money outstanding, it should be granted the reliefs as claimed. It relied on the case of REEVES MALAMBO V PATCO AGRO INDUSTRIES LIMITED (2) where the Supreme Court held that: "A mortgagee is at liberty to exercise his right to foreclosure and sell the property in the event of default and failure by the mortgagor to redeem the Mortgaged Property; and that under a legal mortgage by demise, the mortgagee becomes an absolute owner of the mortgage term at law as soon as the day fIXed for redemption has past". The case of KASENGELE V ZAMBIA NATIONAL COMMERCIAL BANK (3) was also cited. In that case the Supreme Court held as follows: "We wish also to comment on the Respondent's ability or non - ability to pay. There is evidence at page 88 of the record of appeal from DW1, Edward Mutale, the Respondent's accountant that if the -J6- Board had ordered the Bank to pay it was going to be done. Moreover inability to pay has never been and is not a defence to a claim. Neither is it a bar to entering Judgment in favour of a successful litigant". On 1st April, 2016 the Respondents filed a Notice to Admit Claim pursuant to Order 21 Rule 1 of the High Court Rules, Chapter 27 of the Laws of Zambia. The Respondents admitted owing the Applicant Kl,580,334.85 only but applied for an Order directing the Applicant to grant the Respondents additional time namely 120 days from the date of the Order and or to suspend any Orders for possesslOn that the Applicant may obtain following these proceedings. For this submission the Respondents learned Counsel cited the discussion at Order 88/5/13 of the White Book, 1999 Edition. The Summons for an Order for Extension of time within which to settle the Admitted Claim and or suspension of Orders for possession was supported by an Affidavit and Skeleton Arguments dated 1st April, 2016. The Respondents having clearly admitted to owing the Applicant the sum of Kl,580,334.85, I accordingly enter Judgment in favour of the Applicant Bank against the 1st and 2nd Respondents for the -J7- • payment of the sum of K1,580,334.85 as at 17th February, 2016 with interest continuing to accrue as contractually agreed. It is further Ordered that the said sum be paid within sixty (60) days from date hereof. In the event of default, the Applicant shall foreclose, have vacant possession of the Mortgaged Property namely Subdivision No. 44 of Subdivision "D" of Subdivision No. 1 of Subdivision "A"of Farm No. 687, Lusaka and exercise its power of sale of the property. In the event that the proceeds from the sale of the Mortgaged Property is not enough to expunge the indebtedness in full, the Applicant shall be at liberty to execute on the 2nd Respondent as guarantor. Costs to the Applicant Bank to be taxed in default of agreement. Leave to appeal is granted. Dated the 30th day of June, 2016 . ....................................... WILLIAM S. MWEEMBA HIGH COURT JUDGE -J8-