Florence Mwansa Mutwala v New Future Financial Company Limited (2019 / HP/0377) [2022] ZMHC 70 (10 October 2022)

IN THE HIGH COURT FOR ZAMBIA AT THE PRINCIPAL REGISTRY HOLDEN AT LUSAKA ( Civil Jurisdiction) BETWEEN: 2019 / HP/0377 FLORENCE MWANSA MUTWALA PLAINTIFF AND NEW FUTURE FINANCIAL COMPANY LIMITED DEFENDANT Before Hon. Mrs. Justice Mwaaka Chigali Mikalile this 10th October, 2022 For the Plaintiff: Ms. D. Chisengalumbwe- Messrs K. Mwale & Co For the Defendant: Mr. M. Bah- Messrs NCO Advocates d U. I>G-ivIENT Cases referred to: 1. Luke Phiri v. David Tembo HPC 574 of 2010 2. Firthglow Ltd (T/A Protectacoat) v. Szilagyi (2009) EWCA Civ 98 3. Re Molto Finance Limited (1967) 3 All ER 844 4. RTS Flexible Systems Ltd v. Molkerei Alois Muller Gmbh & Co (UK Production) (2010) UKSC 14 5. Printing and Numerical Registering Company v. Simpson {1875) LR 19 Ex.462 6, Roland Leon Norton v. Nicholas Lostrom (2010) Z. R 358 Vol. 1 Works referred to: J1 1. Garner. Black's Law Dictionary (8th Edition): Thompson West, 2004, USA 2. Halsbury's Laws of England 4th Edition, Volume 32 3. Law of Contract, 13th Edition, Butterworths (1996) Introduction The dispute in this matter is centred on a property known as Stand No. 443 situate at Chilanga in the Lusaka Province. On the one hand, the plaintiff alleges that she obtained a loan in the sum of $60,000 fr~m the defendant, a lending company, and deposited the title deed relating to the property as collateral. She was unable to pay back the loan within the agreed time. Through this suit, the plaintiff claims redemption of the property. The defendant, on the other hand, denies the assertion that the parties entered into a loan agreement and insisted that the parties consciously and freely entered into a contract of sale of stand 433 Chilanga and that the defendant paid $60,000 for the property. The defendant counterclaims vacant possession. Pleadings The matter was commenced by originating summons an 13th March, 2019. However, by a consent order filed on 14th February, 2020, it was agreed that the matter proceeds as if begun by way of writ of summons and statement of claim. Thus, on 5th March, 2020, the plaintiff filed a writ of summons and statement of claim seeking the following reliefs: J2 1. Declaration that the deposit of title deeds relating to Stand No. 433 Chilanga resulted in the creation of an equitable mortgage. 11. An order for the plaintiff to exercise her equitable right to redeem the property; 111. Damages for breach of contract; 1v. Costs; and v. Any other relief the court may deem fit. The statement of claim reveals that that by the contract 1n writing dated 14th June, 2018, the plaintiff obtained a loan in the sum of $60,000.00 equivalent to K595,500.00 from the defendant. Security for the loan was by way of deposit of the tittle deed relating to the property known as stand No. 433, Chilanga. It was a term of the con tract that the said sum of money would be amortized within 6 months from date of disbursement whereupon the plaintiff would redeem the property pledged as collateral for the loan. The defendant only disbursed the sum of K297,000.00 instead of the total sum of K 595,500.00 and the remainder was claimed as interest already deducted from the total sum due to the defendant. According to the plaintiff, the defendant was 1n breach of the contract for failure to pay the total sum of K595,500.00 as per agreement under the contract. Therefore, when the loan came up for repayment the plaintiff was unable to make a payment under the contract. J3 The defendant has continued to impose penal interest on the loaned sum of money thereby making it impossible for the plaintiff to redeem the property pledged as collateral. As a result, the plaintiff has suffered loss and damage. On 12th October 2021, the defendant filed a defence and counter claim in which it was averred that the defendant is also in the business of buying and selling property. The defendant denied the assertion that the contract of 14th June, 2018 was for a loan to the plaintiff but that the plaintiff offered to sale her house to the defendant and the parties executed a contract of sale and not a loan agreement for the sale of the subject property at the price of $60.000. According to the defendant, the only documents executed by the parties were a contract of sale and an accompanying deed of assignment which documents were freely and voluntarily executed. There was no loan agreement entered into by the parties. The defendant denied the assertion that the sum of money was to be amortised in 6 months. It was averred that it was a term of the contract that the defendant would not change the title of the property into its name for at least six (6) months after the date of the contract of sale. It was agreed between the parties that if the plaintiff refunded the purchase pnce to the defendant within the said period of six (6) months, then the defendant would reverse the transaction and return the certificate of title to the plaintiff. J4 It was the defendant's further averment that the plaintiff was 1n default of clause 6 of the special conditions of the contract of sale by being in possession of the property. She has strangely continued to deny the defendant vacant possession of its legally owned property and as a result the defendant has suffered damage. The defendant denied the assertion that the plaintiff has suffered loss and damage. According to the defendant, there was no mortgagor and mortgagee relationship created between the parties. The only relationship that existed is that of buyer and seller thus the question of redemption does not arise. The defendant went on to counterclaim the following: (a)A declaration that the sale of stand No. 433, Chilanga at the price of $60,000 has been completed, is valid, and cannot be cancelled by virtue of the purchase price in the sum of $60,000.00 having been paid in full and received by the plaintiff. (b)The plaintiff transfers vacant possession of the property. (c) An order for cost; and (d) Such further and other relief the court will consider just. The plaintiff filed a reply and defence to counterclaim on 15th October, 2021. She averred that she did not offer her property for sale as alleged but entered into a loan agreement for the loan to be repaid within 6 months. She was given an option to extend the time frame to redeem the loan. She is desirous of paying off the JS loan and has in fact com.menced repayments. According to the plaintiff, the issue of yielding vacant possession to the defendant does not arise as the parties entered into a loan agreement wherein the plaintiff deposited her certificate of title as security for the loan. She averred that the defendant is not entitled to any of the reliefs claimed. Trial course The plaintiff testified as PWl and called one other witness. No witness was called for the defendant. PWl testified that in or about May, 2018, she visited the defendant company in the company of PW2 seeking a loan of K 600,000.00. She was informed of the conditions and the property in issue was inspected which comprises a house on one side and a school on the other side. She was given a loan agreement which she read and upon being satisfied with the terms and conditions, decided to go ahead with the transaction. After a week or so, she was informed that the money was ready. To her surprise, she was given a contract of sale. She tried to protest as she was there for a loan and not to sale her property but was told that it is company policy because they had been swindled by a lot of people in the past. According to the defendant, the contract was for security of its money and immediately the loan was paid back, the property would be returned in the plaintiff's name. With that answer, she decided to go ahead. To her dismay, she was given less than the K 600,000.00 she applied for: She was informed that they had J6 deducted insurance, interest and loan processing, so the total money she would get was K300, 000. She was initially given KlSO, 000. 00 and a paper to sign which read that she had collected $60,000 which was equivalent to the K600, 000.00. Three weeks later, she was given K139,000.00. When she asked why, she was told that the dollar rate was higher that day. So, the total money disbursed of the K 600,000.00 she applied for was K289,000.00. She requested for the loan agreement copy but was told that the one who issued the same was not around and that she could collect it later. Her brother did go to the defendant company to try and collect the agreement but was not given. It was PWl 's further testimony that after about 5 to 6 months, she returned to the defendant company to ask for an extension of 6 months to repay. She was told that their daily interest rate was K2, 500.00. She argued that she did not see this in the agreement. She again asked for the agreement but was told they could not give it to her. This prompted her to commence this action. During cross examination, PWl reiterated that she signed a loan agreement and many other documents. When shown a document in the defendant's bundle of documents, PWl stated that it was a Deed of Assignment. When referred to special conditions No. 6 and 7 of the contract, PW 1 admitted that she had not paid anything by 13th December, 2018. She said she attempted to pay K 8,000.00 but the defendant refused to get it. J7 PW 1 also stated that she agreed to get the amount that was less than what she asked for. When referred to the receipt at page 10 of the defendant's bundle, PW 1 stated that she signed this document before she was informed of the deduction. She reiterated that she received only K 289,000 even if her statement of claim says K 297,000. Still in cross examination, PWl stated that the agreement with the defendant was to pay back K 600,000.00 within 6 months and she was willing to repay the loan. She has since paid back closer to K 80,000.00. There was no re-examination. PW2 was Abraham Mutwale Kasote, PWl's brother. He told court that the role he played was to witness the loan agreement. It was his testimony that he accompanied PW 1 to the defendant company and after the preliminaries, PWl was given a loan agreement form and other loan forms. He and PWl went through the terms and conditions and one of the terms was 6 months to repay plus room for extension. PWl subsequently signed the documents and at the time of collecting the money, other documents were introduced such as contract of sale and deed of assignment. They were told it was security for the company. He appended his name and signature on the documents and PWl was given K 150,000.00 as that was the only kwacha available. A Chinese man then produced a document with the amount $60,000 indicated on it which was equivalent to K600,000.00. According to PW2, he J8 asked PWl why she was signing for $60,000 as if that is what she was given but she assured him that they had explained the deductions to her. PWl was only called back the following month to collect the balance and she informed PW2 that she was given less because of the current dollar rate. He found this disturbing because PW 1 should have collected K300, 000 according to the calculations done in his presence. It was further PW2's testimony that PWl had asked him to collect a copy of the loan agreement. However, a Mr. Zulu, an employee of the defendant, informed him that the company actually does not give copies of loan agreements. PW2 testified that the defendant knows the reason why they have not included the loan agreement in their bundle of documents. PW2 was not cross examined. Submissions Learned counsel for both parties filed written submissions for which I am most grateful. I shall not reproduce the submissions but will make reference as appropriate. Analysis and decision I have carefully considered the pleadings, evidence adduced, submissions and the authorities cited therein. Facts not in dispute are that the suit property known as Stand No. 443 Chilanga is registered in the plaintiff's name. The plaintiff entered into an agreement with the defendant involving the said property. What is in dispute is the nature of the agreement with the plaintiff arguing that she merely borrowed money from the defendant and the deposit of the title deed relating to the property resulted in the creation of an equitable mortgage while the defendant contends that the plaintiff sold the property to the defendant. I am, therefore, of the considered view that the issue that I ought to resolve is: Whether or not the transaction between the parties herein resulted in the creation of an equitable mortgage entitling the plaintiff to an order to redeem the suit property. On behalf of the plaintiff, it was argued that this court should not only consider the general title of the documents but rather the form and the contents thereof. The court was referred to the contract of sale of 14th June, 2018 at pages 4 to 8 of the plaintiffs bundle of documents with particular reference to conditions 6 and 9 of the special conditions which are reproduced hereunder: 6. As agreed by the parties, the vendor shall transfer the property and all the facilities on the land including but not limi.ted to the houses and all the unexhausted fixed improvements thereon to NEW FUTURE FINANCIAL COMPANY LIMITED. The purchaser has, however, granted the vendor an option to redeem the property herein including the land, houses and the appurtenant before the agreed date which date for avoidance of doubt shall be 13th day of DECEMBER, 2018 and the purchaser will accordingly reserve the properties including the land, houses and appurtenant for 6 months. If the vendor pays the total amount of $60, 000. 00 to the purchaser before the said 13th day of December, 2018, the purchaser shall ensure to transfer or hand back the certificate of title and relevant documents to the vendor. If the vendor fails to pay the money for redemption before the agreed date, the vendor has another chance to extend the period for redeeming the above property. The vendor needs to write to the JlO purchaser about the extension days and pay off the extension occupying charge and the cost of profit to the purchaser. If the vendor not paying, the property herein including the land, houses and the appurtenant shall be fully transferred to NEW FUTURE FINANCIAL COMPANY LIMITED (the company}. The purchaser shall have the right to dispose of the property herein by itself 9. the parties herein specifically agree that: The purchaser hasn't collected any other fees from the vendor within the contract agreed period. The vendor promises that if the exchange rate goes down when buying back the property, the vendor will undertake to compensate the difference to the purchaser due to the exchange rate of which date signing the contract. Arising from this, it was argued that an ordinary contract of sale does not contain a buy back clause as a term for the sale of property; an ordinary contract of sale is a complete buy out of the rights and interest of the proprietor of the property; an ordinary contract does not have the right to redeem and reserve the property for a period of 6 months to buy back the property; an ordinary contract does not have an extension period within which to buy back the property in writing and; an ordinary contract does not have an occupying charge and cost of profit clause. According to counsel, the foregoing conditions negate the existence of a contract of sale but rather the existence of a mortgage between the plaintiff and the defendant. Reference was made to the case of Luke Phiri v. David Tembo (1) wherein Mutuna J, as he then was, stated thus; In my considered view, a transaction that provides for forfeiture of a property on default cannot be said to fall under the umbrella of a mortgage Jll or equitable mortgage. My finding is fortified by the fact that a mortgagor always retains the right of redemption, as is evident from the definition of mortgage as I have demonstrated above which indicates that the assignment of the property becomes void upon payment. Counsel went on to argue that the requirement in conditions 6 and 9 of the contract of sale renders the relationship of the parties as that of mortgagee and mortgagor and not that of vendor and purchaser. He then referred court to the case of Firthglow Ltd (T/A Protectacoat) v. Szilagyi (2) in which Smith W stated that the court has to consider whether or not the words of the written contract represent the true intentions or expectations of the parties. According to counsel, the testimonies of PW 1 and PW2 have proven that the plaintiffs intention from the very beginning was to execute an equitable mortgage and not a contract of sale and conditions 6 and 9 had assured her that what she entered into was not a contract of sale but an equitable mortgage. It was submitted that when a mortgage is creat.ed there are remedies available. The remedies depend on whether the mortgage is a legal mortgage or equitable mortgage. The mortgage in this matter is an equitable one and as such, the plaintiff has the right to redeem the suit property. The court's attention was also drawn to the case of Re Molto Finance Limited (3) where the Court of Appeal stated: J12 "When an equitable mortgage or charge is created by deposit of title deeds there is an implied term that the mortgagee or chargee may retain the title deeds until he is paid." The mortgagee in this case, it was submitted, can hold on to the title deed until the payment of the debt but does not have the power to dispose of the property not until a court order for foreclosure is obtained. On behalf of the defendant, it was submitted that the parties consciously and freely entered into a contract of sale of the suit property. The case of RTS Flexible· Systems Ltd v. Molkerei Alois Muller Gmbh & Co (UK Production) (4) was cited where the Supreme Court of the United Kingdom held that: The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what tenns depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the tenns which they regarded or the law requires as essential for the fonnation of legally binding relations. Even if certain tenns of economic or other significance to the parties have not been .finalized, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement. It was submitted that the above case sets out sound and correct legal principles applicable in our jurisdiction. on the law of contract. J13 It infers that where parties reach an agreement on all terms of a contract they regard (or the law requires) as essential, a contract can be deemed to have been formed. The essential requirements are that there must be an intention to create legal obligations and consideration. Counsel went on to submit that the law will not always require commercially sound or sensible terms as long as it can be demonstrated that parties have agreed on the terms and consideration exists upon which the parties can be held to their bargain. I have carefully considered the opposing arguments. To start with, it is prudent that the words "mortgage" and "equitable mortgage" are defined. Black's Law Dictionary, 8 th edition defines mortgage at page 1031 as follows: "A conveyance of title to property that is given as security for the payment of a debt or the performance of a duty and that will become void upon payment or performance according to stipulated terms," Equitable mortgage is defined at page 1032 as: ''. A transaction that has the intent but not the form of a mortgage, and that a court of equity will treat as a mortgage" Further , an equitable mortgage has been described in Halsbury's Laws of England 4th Edition, paragraph 405 of Vol. 32 as follows: "An equitable mortgage is a contract which creates a charge on the properly but does not convey any legal estate or interest to the creditor; such a charge J14 amounts to an equitable interest. Its operation is that of an executory assurance which, as between the parties, and so far as equitable rights and remedies are concerned, is equivalent to an actual assurance, and is enforceable under the court's equitable jurisdiction." Thus, the features of a mortgage are the assigning of a property as security for payment, which assignment is rendered void upon payment of the money. Further, any agreement bearing such intention is an equitable mortgage. Before court is a contract of sale dated 14th June, 2018 between the plaintiff and defendant and a deed of assignment. There is also a receipt showing that the plaintiff received USD60,000 in accordance with the contract of sale of 14th June, 2018. I have been called upon to look at the form and content of the contract as opposed to the general title. It was highlighted that an ordinary contract of sale: does not contain a buy back clause as a term for the sale of property; does not have the right to redeem and reserve the property for a period of 6 . months to buy back the property; does not have an extension period within which to buy back the property in writing and; does not have an occupying charge and cost of profit clause. That may be the case to some extent, but I tend to agree with the submission on behalf of the defendant that the law will not always require commercially sound or sensible terms as long as it can be demonstrated that parties have agreed on the terms and JlS consideration exists upon which the parties can be held to their bargain. The case of RTS Flexible Systems Ltd v. Molkerei Alois Muller Gmbh & Co (UK Production) is instructive on this issue The contract of sale of 14th June, 2018 clearly shows that the plaintiff agreed to transfer the property to the defendant but was given an opportunity to buy it back within 6 months at $ 60,000 and she was at liberty to extend the period. It is important to note that there is no document on record to show that the plaintiff ever asked for an extension and that the said request was constructively denied by the defendant as suggested. The contract further states that upon failure to buy back the property within the agreed time, the sale would be completed. It is clear from the evidence on record that the plaintiff has failed to buy back the property. The documents at pages 1 to 3 of the plaintiff's bundle of documents show that the plaintiff has only remitted a measly K 70,000.00 of the $60,000.00 into the defendant's bank account. It should be borne in mind that a period of 4 years has elapsed since the transaction. Contrary to the plaintiff's assertion, the contract in this matter has the traditional mechanics of offer and acceptance and furthermore, the existence of the intention to create legal obligations cannot be denied. The parties herein freely set and agreed to the terms of the agreement. Both parties freely signed the contract. ·My role is to give effect to what the parties have agreed upon. J16 I am fortified by the learned authors of the Law of Contract, 13th edition, Butterworths (I 996) at page 29 who state: Behind all fonns of contract, no doubt, lies the basic idea of assent. A contracting party, unlike a tortfeasor is bound because he has agreed to be bound. Agreement, however, is not a mental state but an act, and as an act, is a matter of inference from conduct. The parties are to be judged not by what is in their minds, but by what they have said or written or done. There is no evidence on record to support the assertion that the parties signed a loan agreement. As stated earlier, what is on record is a contract and this contract describes the parties as vendor and purchaser. Clearly, the transaction conveys legal estate or interest in the property to the defendant. This contradicts any suggestion that there exists a mortgage. By providing for full transfer of property in the event of failure by the plaintiff to buy back and by virtue of the assignment of the property to the defendant, the transaction was taken out of the realms of a mortgage. Having been satisfied that the contract of sale of 14th June, 2018 and deed of assignment were freely entered into and signed by both parties, I am bound to enforce them. I am guided by the case of Printing and Numerical Registering Company v. Simpson (5} quoted in the case of Colgate Palmolive (Z) Inc v. Able Shemu Chuka and 110 Others at page 8 which states as follows: "If there 'is one thing more than another which public policy requires it is that men of full age and competent understanding shall have the utmost liberty in contracting and that their contract when entered into freely and voluntarily shall be enforced by Courls of justice." In the circumstances, the plaintiff has failed to prove on a balance of preponderance that the transaction between the parties resulted in the creation of an equitable mortgage. I find that the sale was successfully concluded and the question of redemption does not anse. The plaintiff claims damages for breach of contract on account of the fact that the defendant disbursed only K 289,000.00 as opposed to the agreed K 595,000.00 or $60,000. I, however, find that the evidence does not support this allegation. The receipt at page 9 of the plaintiffs bundle of documents shows that the plaintiff acknowledged receipt of $60,000. For argument's sake, if it is true that the plaintiff was presented with and accepted less money, then she did it at her own peril. She had the option to rescind the contract but chose to go ahead. She cannot now turn around and cry foul. But, as I have stated, the evidence clearly shows that she received $ 60,000. I am fortified by the case of Roland Leon Norton v. Nicholas Lostrom (6) where the Supreme Court held that: " ... it is trite law that a party to a contract is bound by it even though it may not have been in the interest of that party entering into that contract ... Even a bad contract if its valid, is binding." Counterclaim ~ I have not lost sight of the fact that the defendant counterclaimed vacant possession of the suit property. Having found that the sale of the suit property was completed, it follows that the defendant is the owner of the said property and is therefore entitled to vacant possession. Conclusion By way of concluding and for the avoidance of doubt, I make the following orders: 1. The plaintiffs case 1s dismissed 1n its entirety for want of merit. 2. The defendant is the rightful owner of the property in issue and the plaintiff is ordered to vacate the property within 30 days of the date hereof. 3. The defendant is granted costs to be taxed m default of agreement 4. Leave to appeal is granted. Dated at Lusaka this 10th day of October, 2022 l.. Uu OF ,v Mwaak:a Chigali Mikalile KA HIGH COURT JUDGE 11 9