Lawrence Nkosi v Febby Christine Kabwe and Ors (Appeal No. 67/2020; CAZ/08/47/2020) [2022] ZMCA 132 (17 June 2022)

• IN THE COURT OF APPEAL OF ZAMBIA Appeal No. 67/2020 HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: --- CAZ/08/47/2020 LAWRENCE NKOSI APPELLANT AND FEBBY CHRISTINE KABWE 1 ST RESPONDENT PENGUIN INVESTMENTS LIMITED 2ND RESPONDENT NATIONAL HOUSING AUTHORITY 3RD RESPONDENT Coram: Makungu, Sichinga and Banda-Bobo, JJA l 'lt-h June 2021, 26th August, 2021 and l 'lt-h June, 2022 For the Appellant: Mr. T. Gausi, and Mrs. K. M. Chilupe of Messrs Sukwana, Mweemba and Company For the 1st Respondent: Mr. H. H Ndhlovu and Mr. B. Musendema of Messrs H. H. Ndhlovu & Company For the 2 nd Respondent: No appearance For the 3 rd Respondent: No appearance JUDGMENT Sichinga JA, delivered the judgment of the Court. Cases Referred to: 1. Banda and Another v Mudimba 2010/HP/A39 2 . Base Property Development Ltd v Chileshe and Others SCZ Appeal No. 211of2015 3 . Nora Mwaanga Kaboya and Alizani Banda v Eunice Kumwenda and Andrew Ngulube SCZ Appeal No. 19 of 2003 4. Kalusha Bwalya v Chadore Properties Ltd and Another Selected Judgment No. 20 of 2015 5. Hunt v Luck (1902) 1 Ch. D 428 6. Musesha Chitundu Joseph Kunkuta v Chibangula and Another, SCZ Appeal No. 8 Of 2019 7. Elias Tembo v Maureen Chirwa and 4 Others SCZ Appeal No. 5 of 2018 8. Bomiface Kafula & Ors V Billings Choonga Mudenda SCZ Appeal No. 202 of2003 9. Jamas Milling Company Ltd v lmex International Pty Limited (2003) ZR Legislation referred to: 1. Lands and Deeds Registry Act, Chapter 185 of the Laws of Zambia Other Works: 1. Jill Martin, Hanbury and Martin: Modem Equity, (London, Sweet and Maxwell Limited, 1997 edition) 1.0 Introduction 1.1 This appeal is against the ruling of the High Court (Newa J) dated 27th January, 2020 on review of a judgment. The ruling dismissed the appellant's application for review with the effect of maintaining the court's holdin g that possession -J2- of a house be granted to the 1st respondent, who was eligible to purchase it as a sitting tenant. 2.0 Background 2.1 The 1 st respondent commenced this action 1n December, 2002 in the Subordinate Court against the 2 nd and 3 rd respondents, claiming surrender of tenancy of house number 10-15 Kabwata Estate, Lusaka (the subject property). She had been allowed to stay in the disputed house by her brother, Allam Kabwe Snr, (now deceased), who was the main shareholder in the 2 nd respondent company, Penguin Investments Limited. The 2 nd respondent was the legal tenant of the property which belonged to 3 rd respondent, National Housing Authority. 2.2 The 1s t respondent occupied the property as a sitting tenant for more than 20 years and as such, qualified to purchase it as per government policy of housing empowerment and National Housing Authority conditions of sale. 2.3 Upon Allam Kabwe Snr's demise, issues arose regarding the 1st respondent's continued occupation of the property. She commenced the action in the Subordinate Court to assert her right to purchase the property. The record shows that the matter was dismissed for want of prosecution in 2004 and during that time, the 1 s t respondent's nephew, Allam Chileshe Jnr, met with the 2 nd respondent, who offered him to purchase the house. He accordingly paid the purchase -J3- pnce and obtained a Certificate of Title in his name. The matter was subsequently restored to the active cause list. After trial, the Subordinate Court delivered a judgment in which it found that the 1 st respondent was not eligible to purchase the house as she was not a sitting tenant but had only been allowed to stay in the house by her late brother Allam Kabwe Snr, who was a Director of the 1 st respondent company which was a tenant of the 2nd respondent. 2.4 On appeal, the High Court found that the 1 st respondent was eligible to purchase the house, having been a sitting tenant. That she was authorized to occupy the house as caretaker by the deceased director of the 2 nd respondent company. The court also found that Allam Chileshe Jnr, who was neither a sitting tenant nor an employee of the 2 nd respondent, was not eligible to purchase the house and his purported purchase was therefore void. The High Court ordered a refund of the purchase price and cancellation of Certificate of Title issued in his name. 3.0 Application for Review 3.1 Following the judgment on appeal, the appellant joined the proceedings and subsequently applied for special leave to review the judgment pursuant to Order 39 Rules l and 2 of the High Court Rules, which was granted. 3.2 According to the affidavit in support of the application to review judgment, the appellant herein purchased the -J4- subject property from Allam Chileshe Jnr, who was the registered owner according to the Certificate of Title and a search at the Ministry of Lands confirmed this. The appellant paid K285,000 as purchase price. Thereafter, he took possession of the subject property, unaware that it was a subject of litigation, until he was made aware of the judgment nullifying the sale to him. 3.3 He prayed that the lower court, in reviewing the judgment, could find that he was a bona fide purchaser for value and risked suffering irreparable damage if evicted from the house. 3.4 Opposing the application to review, the 1s t respondent deposed that she would suffer the most prejudice if the application to review was allowed as she continued renting another house despite having obtained judgment in her favour. She stated further that the appellant had not shown sufficient grounds upon which the court could review its judgment as there was no error, slip or omission that would warrant reopening the case. 3.5 The High Court, in the ruling, that is the subject of this appeal, dismissed the appellant's application for review, having found that the appellant did not exhaust all enquiries to establish who was in possession of the property when he bought it, and he did not inquire from the 2 nd respondent as regards any issues surrounding the property. The lower court, therefore, found that there was insufficient -JS- evidence to show that the appellant was an innocent purchaser fo,r value .. He was therefore ordered to vacate the house within sixty (60)1 days from the date of the ruling. 4.,0 The Appeal 4. 1 The appellant lodged this appeal, citing the following grounds :. i)' The lower Cou.rt erred in fact wh.en having found that the appel.lant was not in possession of the property, it found that the app:ellant. had c·onducted a search on the property a:t Min.istry of Lands W'hic:h revealed that Mr. Allam Chileshe was the registered oiwner; and having ensured that the caveats that had be'en registered against the p ·roperty were du.ly withdrawn before he could register his assignment on 6 t h Jun.e 2013, it still found that insufficient reasons had been advanced by the appellant to sh.ow th.at he· was an innocent purchaser for value. ii) The lower' Court erred in fact when it found that there was no evidence to show th.at the appellant had exhausted all enquiries surrounding the property, when the appellant had ta.ken possession of the property in June 2013 until he became aware of the proce:edings before the High Court in October 20'13 without anyone ever claiming to be entitled or to be in.terested in the property. iii) Th.e lower Court erred in. law and fact when it failed to consider that the 3 rd respondent had established that he was a bona flde purchaser for value by taking the following steps: conducting th.e relevant searches at Ministry of Lands:; ensuring t ha.t there were no caveats or ju.dgmen.t registered agai nst the property; establishing the -J6- ownership of Mr. Allam Chileshe, the seller of the property; registering an assignment into his name; taking possession of the property without any problems or adverse i nterests being brought to his attention. 5.0 Appellant's arguments 5 .1 In support of the appeal, written heads of argument were filed on 27th April, 2020. Counsel submitted therein that the essence of the appeal is to establish whether the appellant was a bona fide purchaser for value without notice. Several authorities were cited on this principle, which we have taken note of, including Banda and Another v Mudimba1 and Base Property Development Limited v Chileshe and Others2 . 5.2 In applying the law to the facts of this case, counsel made the following submissions to demonstrate that the appellant qualifies as a bona fide purchaser for value without notice- i) A purchaser must act in good faith : that the appellant acted in good faith, as the property was purchased from the title holder and the parties concluded the conveyance in accordance with the law. There is no evidence of bad faith. ii) The purchaser acquires interest in the property by grant and must have given value for the property; the appellant purchased the subject property for K285,000 and acquired the property by grant as can be seen -J7- from the lease attached to the Certificate of Title, and not by operation of law. iii)The purchaser must have obtained the legal interest in the property- the property was duly assigned to the appellant and he is therefore protected by the prov1s1ons of section 33 of the Lands and Deeds Registry Act1 as regards a Certificate of Title being conclusive evidence of ownership. iv) The purchaser must have had no notice of the equitable interest at the time he gave his consideration for the conveyance; the appellant conducted a search at the Ministry of Lands which confirmed that Chileshe Allam was the owner and also revealed that a caveat had been placed on the property by one Chibuye Severine, which was removed upon payment of the purchase price, as per agreement. 5.3 The appellant submitted further that contrary to section 58 of the Lands and Deeds Registry Act1 , the 1 st respondent did not register her interest in the property and as such, no notice could have been imputed on the appellant. 6 .0 1 st Respondent's arguments 6.1 In opposing the appeal, the 1 st respondent argued that the lower court was right to hold that the onus was on the appellant to show that he conducted all due enquiries. Had he done so, he would have discovered that the 1 st -JS- respondent was at all material times in occupation of the property until she was evicted during the proceedings in the Subordinate Court. 6.2 The case of Nora Mwaanga Kaboya and Alizani . Banda v Eunice Kumwenda and Andrew Ngu .lu.be3 was cited to emphasize that parties purchasing real property are expected to make serious inquiries regarding possible encumbrances. It was argued further that the appellant did not search the court registry to ascertain whether the property was subject to court action. In addition, that further inquiries would have revealed that the property was subject to sale to sitting tenants and the seller was not the sitting tenant. 6.3 In the alternative, the 1 st respondent argued that Order 39 of the High Court Rules is very clear as to when a judgment may be reviewed. That is; correction of accidental slips or mistakes and does not include hearing of fresh evidence, unless it could be proved that the evidence could not be brought before court because it could not be found with due diligence. The cases of Chibote Limited and Others v Meridien Biao Bank4 and Kalusha Bwalya v Chadore Properties Ltd and Another5 were cited to this effect. 6.4 It wa s also submitted that the 2 nd and 3 rd r espondents were always party to the proceedings but opted not to inf:orm the court of the appellant's interest, and that the appellant was -J9- equally negligent by not inquiring diligently, as that would have revealed that the vendor did not buy the house as sitting tenant when it was subject to sale to a s itting tenant. Hence, the evidence that the appellant had bought the property was discoverable with due diligence and this matter did not therefore qualify for review. 7 .0 Our Decision 7 .1 We have carefully considered the record of appeal and the submissions by counsel for the appellant and 1 st respondent. Our understanding of the summary of the appellant's contention is that he was a bona fide purchaser for value without notice of the prior interest of the 1 st respondent. 7 .2 The 1 st respondent's equitable interest in the subject property is such that she had an expectation to be considered to be offered the house, pursuant to t he government policy of house empowerment. According to the authorities cited by the parties herein, this equitable interest could only have been defeated by the appellant's legal interest if he obtained such interest without notice of the 1 st respondent's equitable interest. 7 .3 The question for our consideration is one relating to priority of interests between the appellant and the 1st respondent and how that affects the appellant's acquisition of the property. The 1 st respondent claims to have been eligible to -JlO- purchase the property and the lower court found in her favour, while the appellant acquired a legal interest in the property that was allegedly subject to the 1 st respondent's interest. 7.4 Accordin g to the lower court, the appellant did not acquire good title as he did not qualify as a bona fide purchaser. To better appreciate the reasoning of the lower court in arriving at its decision to disqualify the appellant, we ref er to the statement of the lower court at pages R18-Rl 9 of the ruling as follows: "While Allam Chileshe who sold the property to the 3 rd respondent can be said to have been dishonest by not disclosing that the property was subject to a Court case, the 3 rd respondent was under an obligation to ensure that there were no encumbrances on the property. There is no evidence before me to demonstrate that 3 rd respondent exhausted all enquiries, especially by establishing who was in possession of the property when he bought it, and whether he made any enquiries from the person he found on the property if at all. Further, there is no evidence to show that he made any enquiries with the 2 nd respondent as regards any issues surrounding the property. " 7 .5 It appears that out of the legal considerations for qualification as a bona fide purchaser as we have set out earlier, the one that mainly informed the decision of the lower court to disqualify the appellant as a bona fide -Jll- purchaser was the requirement that the purchaser should not have had notice of the prior interest. We say so because the court found that had the appellant taken steps to make enquiries on the issues surrounding the subject property before purchasing it, he would have discovered the 1 st respondent's interest. 7 .6 From the authorities cited, it is clear that the position of the law as regards a purchaser's knowledge of a prior interest is that a purchaser is :affected by notice of an equity where such an equitable interest would have come to their own knowledge if proper inquiries had been made- that is; constructive notice. In his book entitled Hanbury and Martin- Modern Equity1 , Jill Martin states at page 27 that: "Thus prior equitable interest in land can on~y be defeated by a bona Ji.de purchaser, and without notfoe:, then the equities are equal, and his :legal estate prevails. If he took with notice, th,e positfon is otherwise, as the equities are not e.qua:Z. .lf he d ,oes not acquire a legal estate, then the first in time, i.e. the prior equitable interest prevails, as equitable interests rank in order of creation." 7. 7 The lower court stated in its ruling that the record does not show who was in occupation of the property when the appellant bought it, but evidence shows that Allam Chileshe never lived in the house. That nonetheless, the appeHant ought to show that he conducted enquiries from whoever was on the property to determine whether there were any -Jl2- encumbrances, apart from th ose that appeared on the land register that should have put him on notice. 7 .8 In challenging this appeal, the 1 st respondent went as far as submitting that the appellant d id not search the court registry to ascertain wh ether the subject property was subject to court action and also that further inquiries would have revealed that the property was subject to sale to sitting ten ants and the seller was n ot a sitting tenant. 7.9 We n ote th at the lower court, in both the ruling and the judgment, referred to and relied on the case of Hunt v Luck5 . Our reading of the case reveals that it was also stated therein that "If a purchaser or mortgagee has notice that the vendor or mortgagor is not in possession of the property, he must make enquiries of the person in possession, of the tenant who is in possession, and find out from him what his rights are, and if he does not choose to do that then whatever title he acquires as purchaser or mortgagee, will be subject to the title or right of the tenant in possession. " 7 .10 In casu, the record does not show whether the 1 st respondent was in occupation of the house at the time the appellant purchased the property in June 2013. We note, however, that there is undisputed evidence on record that, the appellant took possession after completion of the conveyance and he was informed of the court proceedings about later in October, 2013. -J13- 7 .11 The question that we ought to unavoidably ask ourselves is what amounts to making sufficient inquiries for purposes of a purchaser escaping being deemed to have had constructive notice? This question, in our view, will settle all three grounds of appeal and we will therefore address all the grounds simultaneously. 7 . 12 In the case of Musesha Chitundu Joseph Kunkuta v Chibangula and Another6, the purchaser carried out a due diligence exercise in relation to the property prior to executing a contract of sale by conducting a search at the Lands and Deeds Registry and the National Housing Authority. He then placed a caveat on the property after satisfying himself that there was n o encumbrance and paid the purchase price. The Supreme Court upheld our finding that he was a bona fide purchaser. 7 . 13 It is not in dispute that the 1st respondent did not register her interest as sitting tenant by placing a caveat on the property for purposes of according interested parties such as the appellant notice of her entitlement to purchase the house as sitting tenant. The record shows that two people did in fact place caveats on the property, which the appellant discovered when he conducted a search on the property. These caveats were removed on terms he had agreed on with the vendor, and to his knowledge, the property was clear of other interests until October, 2013 when the High Court entered judgment in favour of the 1 st respondent. -Jl4- • • 7.14 In Elias Tembo v Maureen Chirwa And Four Others7 , we cited Borniface Kafula & Others v Billings Choonga Mudenda8 , where the Supreme Court gave guidance on the effect of a caveat being placed on property when it stated that: ''In law, a caveat is a caution that there are other competing interests, and as such we expected the plaintiff to act with great caution in the acquisition of the house, which unfortunately he did not do. With this evidence, it cannot be said that the plaintiff was an innocent purchaser. " 7.15 We went on to make the following holding: "In this case, however, we opine that in the absence of a caveat, the 1 st and 2 nd Respondents cannot be held to have been negligent in not conducting a search on the property as there was nothing to compel them to act with caution in the acquisition of the property." 7.16 The Borniface Kafula8 case may be distinguished from this one as the appellant herein, upon discovering that the property was subject to caveats, proceeded with caution and ensured that the caveats were removed before he proceeded to pay for the property. The 1 st respondent was not among the caveators. 7 .17 We accordingly find that the appellant did take prudent steps to make enquiries regarding possible prior interest in the property to the extent of discovering caveats and -J15- • . - thereafter proceeding with caution until the caveats were removed. Evidence on record shows that the appellant took possession after conclusion of the sale transaction. He could therefore not have known about the interest of the 1st respondent. There was no evidence that the 1st respondent was connected to the occupant of the house at that time. We equally hold that in the absence of a caveat by the 1st respondent, there was nothing to compel the appellant to take further caution by investigating how the vendor acquired the property, more so that the vendor was the registered proprietor as evidenced by the Certificate of Title. 7 .18 As regards the 1 st respondent's argument that further inquiries would have revealed that the house was subject to sale to a sitting tenant and the vendor was therefore ineligible to purchase it, we had occasion to address a similar issue in the same case of Elias Tembo7 where we held, citing section 58 of the Lands And Deeds Registry Act, that investigating how a seller acquired title is different from ascertaining whether there are encumbrances registered at the Lands and Deeds Registry. There is no law that requires a purchaser of land to make enquiries into how the vendor acquired title to the land on offer. We stated at page J55 that: "Therefore, we uphold the reasoning of the Court below that the provisions of the Lands and Deeds Registry Act entail that a purchaser for valuable consideration from a registered proprietor who -J16· .. has t itle is not required to i nvestigate how the propriet or acquired title.,, 7 .. 19 On this basis, we do not hesitate to dismiss the 1 st respondent's argum.ent that the appellant should have enquired how the vendor, AHam Chileshe, acquired ownership of the property when the said vendor was the duly registered owner of property on title . The statement by the lower court to the effect that there was no evidence to show that the appellant made enquiries with the 2 nd respondent as regards any issues surrounding the property was equally erroneou s, a s the appellant was under no obligation to do so,. and this would be an unfair stretch of the requirement to conduct due diligence before purchasing land in the circumstances of this case. 7.20 The 1 st respondent argued, in the alternative, that this matter does not qualify for review. In Jamas Milling Company Ltd v Imex lnternation.al Pty Limite~, the Supreme Court held that for review under Order 39 Rule (2} of t he High. Cou rt Rules to be available, the party seeking it must show that he has discovered fresh material evidence which would have had material effect upon the decision of the court and h as been discovered since the decision but could not with reasonable diligence h ave been discovered before .. The emphasis is that the fresh evidence must have existed at the time of the decision but had not been discovered before .. -J 17- " 7 .21 The argument being advanced by the 1 st respondent is that the 2 nd and 3 rd respondents, who were always parties to these proceedings, opted not to inform the court of the existence of the appellant's interest. Our reaction to this submission is that there is no evidence that the 2 nd and 3rd respondents had any dealings with the appellant. Granted, the 2nd respondent sold the property to Allam Chileshe. The appellant then bought the property from Allam Chileshe, who has never been a party to the proceedings. There was therefore no link between the 2 nd and 3 rd respondents and the appellant. 7 .22 The appellant's interest could therefore have only been brought to the attention of the court by the appellant himself, who did so by applying to be joined to the proceedings when he became aware of the judgment entered in favour of the 1st respondent. The evidence that the appellant bought the subject property existed at the time of the judgment, as the appellant was actually already in possession of the property. We are of the view that had the lower court been aware that the subject property was subsequently sold to the appellant, this evidence would have had a material effect on the proceedings. We therefore hold that the case was suitable or proper for review of judgment. 8. 0 Conclusion 8.1 This appeal therefore succeeds in its entirety. We set aside the ruling of the lower court refusing to review its judgment. -J18- • ... We also set aside the judgrnent sought to be reviewed, where the lower court ordered cancellation of the Certificate of Title issued in the name of the appellant. if the Certificate has already been cancelled we order that it be re-issued to him. 8.2 We award costs to the appellant against the 1st respondent, same to be agreed upon, and if not, taxed . .......... ~ ... C. K. Makungu COURT OF APPEAL JUDGE D. L . . Sic ......... ~ ............... . A. M. Banda-Bobo COURT OF APPEAL JUDGE COURT OF APPEAL JUDGE -J19-