Magic Carpet Travels and Tours v Zambia National Commercial Bank Ltd (1998/HP/2036) [1999] ZMHC 1 (28 April 1999)

gesting that y cartridges ;noise. mdwetake !xtenuating :e of anned ;umstances :offence of mdnotany ! principles ,ery offence v. We hope ,ade in this >lisham1ed ireann. We vith that of gwrongm The facts enight and 1ggravated his offence ch we now ~ffect from 'dismissed JO MAGIC CARPI 'R VEL AND TOUl{S LTD VZ,\Ml3L·\ NATIONAL COMMERCI/\L il•\, K LI O 61 · M~GICCARPETTRAVELANDTOURS I I ., hIA NATIONALC0:\1MERCIALBANKLTD . r 1 V - HIGII couRl S1LOMUA . J. Sl J BA 28rn APRIL, ' 1998/HP/20.' Land/aw -/::, Land/aw- ( The defendar the third pa11, was in due co the prope1iy <' Held: (i.) Ap, and whc acquires ri. ble mortgage - Crea 1iu11 by deposit of ccrtfficate r /'t itle. - Registration - Efj eu ;hereof . k crbated an equitable mo11gage with a third party. · ·hereafter, ,, dulently obtained a duplicate certificate of title and th~ property s . assigned to the plain ti ff. The defendant registered a caveat on lll inte~ding mortgagee. The plaintiff applied for its re 11oval. I o who acquires title to land in the absence of any encu nbrances 15 o' ~ so lwithout having notice of a prior fraudulent transaction, J · d title to the land. (ii) An~ ~ ' on having an interest in land, either by way of an unregistered agreeme . ~ ·ansi:nission, unregistered mortgage or purchase. c::: n place a caveat at n~t su9h land. The placing ofa caveat effectively mea· ,s that no 20 dealings st.~ch land can be pem1itted after the registration of a l a\'eat. i I ds a equitable mortgage, the position at common 1. w is that ·9 yr surrenders his title deeds to the land as security for the re -~ oan, an equitable mortgage is created. The borrowe· in such ip cannot deal with the land without the knowledge and ~pproval 25 r ; vhose interest in the land takes precedence. (iii) As · when ab payment a relation of the len Cases refcrrec 1. Zambia Pos Appeal N( P Chisi, Chi_; C. Kajimang By an originat has applied for t (a)An ord Limi i. ervice Corporation Ltd v Attomey-Genera/ and Others. 6: ofl097 (unreponed). 11 · Bmlda and Associares, for the appellant. hrt sand Charles, for the respondent. g ummons the plaintiff, Magic Carpet Travel and Tours jmited, fi llowing reliefs:- t secure the removal of the caveat placed on stand number : akai by the defendant, Zambia National Commercial Bank 35 J ! :1;1 d I I ZAMBIA LAW REPORTS (b) An order for the Registrar of Lands and Deeds to cause to be registered in the Lands and D~eds Registry an order withdrawing the cavedt from stand number .i633, Lusaka. The plaintiff and the defendant have filed the affidavits in support and in s opposition to the originating summons respectively. At the-hearing of the matter the parties' legal representatives submitted orally and both of them relied on theit clients' affidavits. The learned legal counsel representing the plaintiff told the court that the plaintiff bought th,.,. property in stand number 5633, Lusaka, from a: third party and free from any em. umbrances. He said that the Certificate offitle to number L2618 was obtained in May, 1995, after the legal requirements, including the requirement of obtaining the ; onsent of the President to the assignment of th~ stand were complied with. I The learned legal counsel suomitted that it was surprising to the plaintiff to discover that the defendant had ?laced a caveat on stand number 5633, Lusaka, JS as an intending mortgagee. He said it was surprising because the defendant was1 not even known to the plaintiff, the defendant was not a mortgagee as the plaintiff had never borrowed money from it to entitle it to place a caveat against the stand. J In his submissions, the learned legal counsel r,'!ferred the court to Section 79 of the Lands and Deeds Registry A.;t, which provides that all transactions to land 20 made before a caveat is lodged are lawful. Consequently, he said that if a caveat was lodged after the plaintiff had acquired the property, the applicant had good title to that property. He disclosed that at the time the plaintiffbought the property, no mortgage was registered against it in the Lands and Deeds Register. It was his contention, and I agree with him, that had the mortgage been registered, the 2S applicant would not have obtained title without discharging the mortgage first. In opposition, the learned legal counsel representing the defendant stated that the caveat lodged by his client was la ;fully lodged and satisfied the requirements of 1 Section 76(c) of the Lands and Deeds Registry Act. As regards the provision of Section 79 of the same Act, that al transactions made before a caveat was lodged 30 were lawful, the learned legal counsel conceded that, that was the law. He, however, pointed out that the exception to the law was where fraud had been established to have existed before the transactio,, took place. I I With regard to the requirement of Section 4 of the Lands and Deeds Registry Act, on the need for every mortgage to be registered, the learned legal counsel 3S submitted that where a borrower deposited title with a bank as security for the money borrowed, a bank could choose either to register the mortgage or simply hold on to the title deed. In the latter sense, what was created was an equitable mortgage which did not require registration, he said. In his considered view, the defendant was lawfully entitled to place a caveat in order to secure its interest MAGIC CARPET TRAVEL AND TOURS against the owner of the property of title and assigned the propt knowledge of the defendant. He i of the application. The issues that arise from the the originating surtooons, as w legal counsel, are three:- The f the plaintiff without notice of fr: The second issue is whether or before a caveat is registered is v mortgage and the risks involved From the facts of the case, it entered into a mortgage arrangi The only collateral he providec Lusaka, thereby creating an equi' It is also not in dispute that Maj S. N. Patel and S. H. Patel throu. he obtained on the pretext that · this was not the case. The fra duplicate title was not precedec The plaintiff then came on · Patels. As far as the defendar such as, a registered mortgage : there would have been no ass· mortgage first. The question i: yes. From the affidavits and ! plaintiff was not an innocent P' the title without any notice off fraudulently. A person who acquires title who does so without having no title to the land. This would st case of 'Zambia Postal Service ( 1) On the availab~e facts, I w good title to Stand Number 5, this ruling are accordingly grai With regard to the second i interest in land, it could be by ieeds to cause to be registered rder withdrawing the caveat affidavits in support and in . Atthe·hearing ofthematter, ,d both of them relied on their :senting the plaintiff told the ,umber 5633, Lusaka, from a d that the Certificate ofTitle egal requirements, including dent to the assignment of the ;urprising to the plaintiff to tand number 5633, Lusaka. : because the defendant was : a mortgagee as the plaintiff ea caveat against the stand. ::cl the court to Section 79 of :hat all transactions to land ntly, he said that if a caveat rty, the applicant had good la inti ff bought the property, l Deeds Register. It was his :gage been registered, the trging the mortgage first. In e defendant stated that the tisfied the requirements of lS regards the provision of >efore a caveat was lodged '. was the law. He, however, ud had been established to ,ands and Deeds Registry the learned legal counsel a bank as security for the :r the mortgage or simply created was an equitable 1 his considered view, the ·der to secure its interest MAGIC CARPET TRAVEL AND TOURS LTD V ZAMBIA NATIONAL COMMERCIAL BANK LTD. 63 against the owner of the property who fraudulently obtained a duplicate certificate of title and assigned the property to another person without the consent or knowledge of the defendant. He accordingly, prayed the court to order the dismissal of the application. The issues that arise from the affidavits both iJ:, ·urport of and in opposition . J 5 I thf originating surtm:lons, as well as, from the c 1.:,ubmissions of the learned legal counsel, are three:- The first one related to .1e acquisition of the stand by I the plaintiff without notice of fraud and the consequences of such an acquisition. The second issue is whether or not the entry of a transfer ofland in the register I before a caveat is registered is valid; and thirdly, the significance of an equitable 10 mortgage and the risks involved. ' }rom the facts of the case, it is not in dispute that Major Richard Kachingwc ,entf red into a mortgage arrangement with the defendant to secure some money. 1111 only collateral he provided was a certificate o ' title to Stand Number 5633, Lusaka, thereby creating an equitable mortgage between the defendant and himself. It is\also not in dispute that Major Kachingwe fraudulently assigned the stand to S. Nf Patel and S. H. Patel through the use of a duplicate certificate of title which he obtained on the pretext that the original certificate had been lost when in fact tpis ras not the case. The fraud becomes even more serious if the issue of a duplicate title was not preceded by an advertisement. IS rle plaintiff then came on the scene and bough, the property from the two atels. As far as the defendant was concerned, there were no encumbrances, I uch as, a registered mortgage appearing on the register. Had that been the case, hen~ would have been no assignment to the plaintiff without discharging the , • rt~age first. The question is, did the plaintiff get a valid title? The answer is 25 es. from the affidavits and submissions, there is nothing to suggest that the laintiff was not an innocent purchaser. The facts show that the plaintiff acquired e ti1e without any notice of fraud. There is no evidence that the plaintiff acted udulently. 1 1 A person who acquires title to land in the absence ?f any encumbrances and 30 lio does so without having notice of a prior fraudulen transaction acquires good le t°i the land. This would seem to be the position in law as exemplified in the c se of Zambia Postal Services Corporation v TheA tlorney-General and Others ( ) °11 the availab~e facts, I would say, therefore, that the plaintiff has acquired g d ~tie to Stand Number 5633 and the orders prayed for at the beginning of 35 l s rut ng are accordingly granted. ii 'f itq regard to the second issue, the law is very clear. Any person having an in est in land, it could be by way of an unregistered agreement or transmission ZAMBIA LAW REPORTS or by way of an unregistered mortgage or purchase, can place a caveat agJnst · such land. The placing of a c ,veat effectively means that no dealings in such land can be permitted after the registration of a caveat. In essence, a caveat is ai;i. instrument that cautions or alerts other interested parties about the caveat r's s interest in the land thereby protecting the caveator against any future dealing iril the land by other people. It i£ not retrospective in effect. In the present case, the caveat was registered after the plaintiff had obtained title with a view to limiting the plaintiff in its future deali '1gs with the stand. This position is unattainable in law. \ ' 10 On the last issue of an equitable mortgage, the position at common law is that once a borrower has surrendered his ti tie deed to the lender as security for the re- , 1 payment of a loan, an equitable mortgage is thus created; the borrower, in sue~ a I l relationship, cannot deal with he land without the knowledge and approval of the · lender whose interest in the land takes precedence. One of the shortcomings bf IS an equitable mortgage is that i is not registered in the Lands and Deeds Registry as an encumbrance against the land; the relationship between the lender and t~e I borrower is one that is based on mutual trust between the two. The lesson flowing from the present case is that an equitable mortgage is open to abuse; in cases of fraud, an equitable mortgage cannot, ofitself, provide sufficient 20 security for the re-payment of the loan. With the decline in the economic fortunek, the majority of borrowers have a tendency for dishonesty. To counteract t~; dishonesty, any potential mortgagee is strongly advised to take advantage of Sec ti ob 76 of the Lands and Deeds Registry Act by registering a caveat against a mortgagetl property as a matter of routine J The plaintiff has succeeded and the costs of this suit shall follow to the event to be taxed in default of an agreement. Plaintiff succeeded YENGWE FARMS VMM YENG\\ MASSTOC THECOID TREAT SUPREME COURT. BWEUPE, OCJ, CHAILA AND CHIRW/ 23RD FEBRUARY, 1998 AND 11 TH N (SCZJudgment No. 11 of 1999) Land /aw-Power of the Com mis: a/locating land. The appellant applied for a ni issue. The application was consi consultations with the local chief. the Commissioner of Lands who gi the appellant with a certificate of for the first respondent of which · Commissioner of Lands then direc title to his farm on the ground ti thousand hectares in trust land anc the allocation of eighteen hecta Commissioner of Lands relied on restricted allocations ofland in res1 the trial judge held that the Cornn circular from granting more than appellant appealed. The issue f Commissioner of Lands had disc appellant and whether it was done l of the title deeds. Held: Circular No. l of 1985 is intet which make recomn Commissioner of La Commissioner of Lane award more than two t circumstances of each c