IMS Financial Ltd v City Express Financial Ltd (Appeal 49 of 2000) [2003] ZMSC 164 (28 May 2003)

IN THE SUPREME COURT OF ZAMBIA APPEAL NO. 49(a)/2000 SCZ/8/323/2000 HOLDEN AT LUSAKA [CIVIL JURISDICTION] BETWEEN: IMS FINANCIAL SERVICES LIMITED APPELLANT AND CITY EXPRESS SERVICES LIMITED RESPONDENT CORAM: Lewanika DCJ, Mambilima and Chitengi JJS, on the 5th day of November, 2002 and 28th May, 2003. For the Appellant Mr. M. Ndhlovu, of Central Chambers. For the Respondent: Mr. R. Mainza of Mainza and Company. JUDGMENT MAMBILIMA JS, delivered the Judgment of the Court. Authorities referred to: (1) Nkhata & 4 Others vs The Attorney-General (1966) ZR 124. This is an appeal against the Ruling of the Court below delivered on 22nd September, 2000 in which the Court ruled that the rate of interest applicable to a loan which was obtained by the Appellant from the Respondent on 5th April, 1996 was 67% simple interest. According to the documents on record, the Appellant took out an Originating Summons on 30th June, 1998 against the Respondent claiming repayment of a sum of K225,906,445.79 as the amount which was due under the Loan Agreement entered into between the Appellant and the Respondent on the said date of 5th April, 1996, The Appellant also sought to enforce the other provisions of the Loan Agreement which included an Order for sale of the items given as security for the loan. After hearing the Summons, the Court below, in a Ruling delivered on 13th September 1999, was of the view that the crux of the matter was the rate of interest. The Court disallowed compound interest on the ground that the parties had not agreed to the same. The matter was referred to the Deputy Registrar for assessment of the amount due. In his Ruling, the learned Deputy Registrar stated that he was unable to assess the amount due and referred the matter back to the Trial Judge for him to determine the rate of interest which was applicable to the loan. The Learned Trial Judge gave his decision on 22nd September, 2000 and ruled that the loan would attract a simple interest rate of 67% and hence this appeal. The Appellant has raised one ground of Appeal which is that the learned Trial Judge misdirected himself in that he failed to take into account the fact that the parties had altered the loan agreement. In his oral submissions in Court, Mr. Ndhlovu submitted that in his Ruling, the learned Trial Judge stated that he was inclined to believe Mr. Chilufya's testimony that the average simple interest applicable at the time was 67%. Counsel pointed out that the said Mr. Chilufya did not give evidence in Court but that he had written a letter to the Managing Director which was filed in Court as an exhibit to one of the Affidavits, According to Mr. Ndhlovu, the learned trial Judge concluded, based on this letter that Mr. Chilufya was more credible than the deponent of the Appellant's Affidavit in Support of assessment of interest. Counsel stated that the Judge should have called viva voce evidence on the basis of which he should have made a decision. In his written Heads of Argument, Mr. Ndhlovu submitted that the Respondent confirms that it was granted a loan of K120 million which was to be repaid in six equal installments. This loan was renegotiated to K87,750,000 at the request of the Respondent. According to Mr. Ndhlovu, the only issue which the Court ought to have considered was whether the parties had indeed entered into a new loan agreement. He went on to state that the Court should have also made a proper finding of fact to determine what amount if any, was due from the Appellant in view of the reconstituted debt. On the disallowing of the interest rate of 115% by the Court, Mr. Ndhlovu submitted that the Court should not equally have accepted that the interest rate applicable was 67%. He stated that such a finding of fact could only be made if the matter had been referred to trial as requested by the Appellant. He urged us to reverse the findings of fact made by the Court below relying on the case of Nkhata and 4 others vs the Attorney-Ge neral (1). In his reply, Mr. Mainza pointed out that in stating that he was relying on the testimony of Mr. Chilufya, the trial Judge was referring to a document prepared by Mr. Chilufya and not that Mr. Chilufya had testified before the Court. Mr. Mainza referred us to page 8 of the Record of Appeal in which the learned trial Judge referred to Mr. Chilufya's letter as being exhibited to an Affidavit. According to Mr. Mainza, reference to Mr. Chilufya as having testified was not fatal. Mr. Mainza further submitted that there was no misdirection on the part of the Trial Judge when he did not take into account the Appellant's evidence that the loan agreement had been altered. He went on to state that the Court arrived at a conclusion that there was overpayment after evaluating Affidavit evidence which exhibited various documents. The Court arrived at findings of fact which cannot be reversed unless it can be shown that the said findings were arrived at on misapprehension of evidence. The trial Judge rejected the evidence adduced by the Appellant because it was not convincing. In his written Heads of Argument, Mr. Mainza submitted that the Appellant conceded that it had been charging the Respondent compound interest on the loan facility of K120 million resulting into a debit balance of K87,750,000. He went on to state that the Judge was on firm ground to have declined the Appellant's assertion that the loan agreement had been altered when the documents relied upon did not reflect the correct position of what transpired. He urged this Court to dismiss the Appeal with costs. We have considered the Ruling of the Court below and the submissions of Counsel. It is clear to us from the documents on record, particularly the Affidavit in Opposition appearing on page 137 to 141 and the document appearing on page 143 of the record of appeal that the original amount of money advanced by way of a loan by the Appellant to the Respondent was K120 million on what the Respondent called "profit sharing basis". There was no agreed rate of interest but the Parties agreed that the money would be repaid over a period of six months in monthly instalments of K28,500,000 per month. Some monies were paid. It would appear that the Appellant charged compound interest on the balances resulting in an outstanding balance of K87,750,000 by April, 1996. According to a letter from the Respondent dated 4th April, appearing on page 33 of the record of appeal, the Respondent requested the Appellant to "...transfer the balance outstanding to a separate loan account with fresh terms and conditions applicable to such credit facilities." The Appellant accepted the proposal and K87,750,000,00 was reflected as a short term credit facility to be paid in four instalments between 30th April,1996 and 31st July, 1996. The amount owing of K87,750,000 came about because of the compound interest which was being charged on the outstanding monies on the original loan of K120,000,000. There having been no dispute that the Parties had originally entered into a loan agreement of K120,000,000, from which an offshoot of another loan of K87,750,000 arose from monies outstanding on the first loan, it was in order for the Judge to certain the rate of interest applicable to the loans. In our view, the learned trial Judge properly found after ascertaining the Affidavit evidence before him and in the absence of an express agreement on compound interest, that only simple interest could apply to the original loan agreement. On this premise therefore, had the correct rate of simple interest been applied, the amount owing could not have reached K87,750,000.00. Between the two rates of 115% and 67% advanced by the Parties, the learned trial Judge accepted the figure of 67% because according to Mr. Chilufya's letter that was the average interest rate prevailing at most banks during the material time. The Judge noted that the figure of 115% used by the Appellant was not justified because the proponent of the said rate, a Mr. Kateka did not state how he arrived at this figure. The learned trial Judge weighed the two competing interest rates on the basis of Affidavit evidence and exhibits filed in Court. The finding of 67% as the ruling interest rate was clearly supported by the evidence before the lower Court. Although the trial Judge referred to what he termed as "Mr. Chilufya's testimony", it is clear to us from the first page of the Ruling that the Judge was referring to Mr. Chilufya's letter which was exhibited to one of the Affidavits. We agree with Mr. Mainza that the reference to "Mr. Chilufya's testimony" by the Judge was not fatal. From the foregoing, we find no merit in the appeal. It is dismissed with costs to be taxed in default of agreement. D. M. Lewanika DEPUTY CHIEF JUSTICE I. C. Mambilima JUDGE SUPREME COURT P. Chitengi JUDGE SUPREME COURT