Mike Kaira v Genesis Finance Limited (in Liquidation) (APPEAL NO. 308/2022) [2024] ZMCA 286 (10 October 2024)

IN THE COURT OF APPEAL APPEAL NO.308/2022 HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: MIKE KAIRA AND , o OC1 202~ APPELLANT GENESIS FINANCE LIMITED (In Liquidation) RESPONDENT CORAM: KONDOLO SC, MAJULA, CHEMBE JJA on 19th September and 10th October, 2024 For the Appellant: Mr. B Mwelwa & Mr. B. Phiri of Messrs Mwelwa & Company For the Respondent: Mr. C. Mweemba of Messrs Willis, Clement & Partners, Legal Practitioners JUDGMENT KONDOLO SC, JA delivered the Judgment of the Court CASES REFERRED TO: 1. National Housing Authority v Kelvin Macwani SCZ/8/59/2011 2. Central London Property v High Trees House [1947] KB J2 of 25 3. Construction and Investment Holdings Ltd v William Jacks and Company Zambia Limited (1972) Z. R 66 4. Sobek Lodges Limited v Zambia Wildlife Authority (HP 669 of 2008) 5. Pan African Building Society v Pemba Liapidaries Limited and Lapemba Trading Limited (2017) ZMCA 137 6. Morgan Naik v Amadeaus International Limited Appeal No.264/2023 7. New Power Industries Limited v Shisholeka Mwamuchena Meckie Appeal No. 175/2021 8. Urvesh Jasvantal Desai v Pan African Building Society (In liquidation) Appeal No. 295/2022 9. John Mutale v Access Financial Services SCZ/24/2011 LEGISLATION REFERRED TO: 1. Banking and Financial Services Act Chapter 387 of the Laws of Zambia (now repealed). 2. Lands and Deeds Registry Act, Chapter 185, Laws of Zambia 3. Corporate Insolvency Act 9 of 2017 1. INTRODUCTION 1.1 This is an appeal against the Judgement of Mrs. Justice S. Kaunda Newa delivered on 8 th August, 2022 in which she allowed the Respondent's application to remove a caveat • placed by the Appellant on Plot 6967 Mapompo Road, Olympia J3 of 25 Extension, Lusaka. 1.2 In the High Court, the Respondent was the Applicant and the Appellant was the Respondent. We shall refer to the parties as the Appellant and the Respondent. 2. BACKGROUND 2 . 1 The Respondent commenced an action by originating summons against the Appellant seeking, inter alia; 1. An order to remove the Caveat on Plot No. 6878 Mapompo Road Olympia Extension Lusaka. 2. Damages costs and interest 2.2 Respondent's Case 2.3 In its affidavit in support of the application, the Respondent attested that it was a licenced micro finance company that was taken possession of and placed into compulsory liquidation by Bank of Zambia in line with the now repealed Banking and Financial Services Act Chapter 387 of the Laws of Zambia (the repealed Act) 2.4 In compliance with the law, the Respondent filed into Court a J4 of 25 liquidation schedule showing all the current assets and liabilities. Among the assets was stand No 6878 Mapompo Road (the disputed property) and among the liabilities, 64 depositors including the Appellant who was owed Kl,672,920.81. 2. 5 That in the course of trying to sell some of its property for the purpose of paying off creditors the Respondent discovered that according to the lands register, the Appellant had lodged a caveat against the disputed property on 11 th August, 2015 claiming an interest as a lender to prevent fraud and protect his interest as an equitable mortgage. 2.6 The Respondent averred that the property in question was never pledged as security for any depositors nor was there any record of an equitable mortgage in favour of the Appellant who therefore had no right to place a caveat on the property owned by the Respondent. 2.7 It was further attested that according to the Respondent's records, the Appellant was a depositor and not a lender. Further, that he was not the only depositor and does not enjoy preferential treatment to the detriment of other depositors and must be paid in accordance with the hierarchy of settling debts in a liquidation process. 2.8 The Respondent on that basis sought removal of the caveat. JS of 25 3. APPELLANT'S CASE 3.1 The Appellant filed an affidavit in opposition attesting that the two parties had an agreement dubbed "Investment Term Sheet" dated 11 th June, 2014 for the sum of ZMW 2,000,000 on a fixed term deposit for 364 days at an interest rate of 20% per annum to be paid monthly in the US Dollar equivalent. 3.2 The Appellant's main grievance was that the terms of the agreement required the Respondent to pledge security for the Appellant's deposit and the Respondent assigned Stand No. 55 Acacia Drive, Eureka Park Lilayi, Lusaka and Stand No. 378a Avondale Extension Lusaka as security. 3 .3 That later on the Appellant decided to withdraw his deposit as per agreement, and when he conducted a search at the Ministry of Lands he discovered that the properties the Respondent had pledged as security did not belong to the Respondent but were registered in the names of Hitenkumar Kanubhai Patel and Avondale Housing Project. Further, that J6 of 25 Stand No. 378a Villa Wanga did not exist at all. The Appellant's search led him to discover the disputed property upon which he proceeded to place a caveat. 3.4 The Appellant insisted that he was within his rights to secure his investment by placing a caveat. According to him, when the Respondent company was placed under compulsory liquidation, the Appellant became a secured creditor, secured by the mortgage placed on the disputed property. 3.5 He stated that the Respondent was wrong to refer to him as a depositor when the correct position is that he became a secured creditor the moment he gave notice to terminate the investment agreement which was secured by an assignment of receivables and that the agreements referred to him as a Secured Creditor. 3.6 He relied on the cases of National Housing Authority v Kelvin Mcwani (ll and Central London Property Limited v High Trees House Limited (2 l in which it was held that promises which were intended to create legal relations and which, in the knowledge of the person making the promise, were going to be acted on by the party to whom the promise was made, and have in fact been so acted on, in such cases, these promises must be J7 of 25 honoured. 3.7 The Appellant emphasized that the caveat was placed a year before the Respondent went into liquidation and in view of the fraudulent properties pledged by the Respondent, he was entitled in fact and law to place a caveat on the disputed property in order to secure his investment. He pointed out that he placed the caveat on the property on 11th August, 2015, and the Respondent only sought to have it removed in January 2022. According to the Appellant, this entailed that the Respondent was aware that the Appellant had placed the caveat on the property, but it did nothing to challenge it, as it had pledged properties that were fraudulent. 3.8 The Appellant further, argued that a secured creditor falls within Section 76 (a) of the Lands and Deeds Registry Act, Chapter 185, Laws of Zambia, and he therefore possessed sufficient interest in the property on which he placed a caveat. 4. RESPONDENTS RESPONSE 4.1 The Respondent in reply stated that there was no record of an executed assignment or mortgage relating to any of the JS of 25 properties and, in any event, its only known property was the disputed property and its certificate of title was never deposited with the Appellant. That the property was still in the possession and custody of the Respondent and reiterated that the Appellant had no right to place a caveat over the said property and that no equitable mortgage was ever created by the parties. 4.2 The Respondent further pointed out that the Bank of Zambia in fact offered ZMW 7,000 as payment made to all depositors across the board based on the available resources which did not represent the final payment. That the Appellant declined to accept the payment. 5. HIGH COURT DECISION 5.1 The learned trial Judge observed that the matter before her was principally an application for removal of a caveat and she noted the contents of section 76 of the Lands and Deeds Registry Act, which states that a person intending to register a caveat must be entitled to the land; beneficially interested in the land; in the process of transferring some interest in the land to some other person; or should be an intending purchaser, or mortgagee of the land in issue. 5.2 The trial Judge stated that in terms of the provision, any person J9 of 25 claiming to be entitled to or to be beneficially interested in any land or claim some interest in land may lodge a caveat. Further, when registering a caveat, the caveator must state with sufficient certainty the nature of his estate or interest, with such other information and evidence as may be required by any regulations under the Act. She reinforced her reasoning on this point by referring to the case of Construction and Investment Holdings Ltd v William Jacks and Co. (Zambia) Ltd) 131• 3. 12. The learned trial judge also referred to section 81 of the Lands and Deeds Registry Act, which places the burden of showing cause why a caveat should not be removed on the Appellant. She cited the case of Sobek Lodges Limited v Zambia Wildlife Authority 141 to amplify her reference. 5 .3 The lower Court proceeded to consider whether the Appellant as the person who lodged the caveat had disclosed an enforceable interest in the property that was lawful and justifiable. 5.4 The learned trial Judge noted that the Appellant, in justifying JlO of25 the placement of the caveat on the disputed property stated that he had done so after discovering that the properties that the Respondent pledged as security for his investment did not belong to the Respondent or were non-existent, thereby evidencing fraudulent conduct on the part of the Respondent company. 5.5 The Court held that the Appellant did not meet the criteria set out in Section 76 of the Lands and Deeds Registry Act because he had failed to prove that the disputed property was ever pledged as security towards his deposit of money with the Respondent. That the evidence did not reveal that he has an enforceable interest in the property and had on that basis not discharged the burden of proof that is placed upon him to show cause why the caveat should not be removed. 5.6 The learned trial Judge opined that under the circumstances, the Appellant had found himself, he should have raised his claims pursuant to Section 106 of the repealed Banking and Financial Services Act, which was in force when the Respondent was place d under compulsory liquidation. That Jll of 25 the Appellants circumstances and claims could not be heard and determined in a matter commenced by Originating Summons for removal of a caveat. 6. APPEAL 6.1 Aggrieved by the decision of the lower court, the Appellant filed an appeal on the following grounds: 1. That the Court below erred in both law and fact when having posed the question to itself that what arose in the matter was whether the Appellant as the person who lodged the caveat had disclosed an enforceable interest in the property that was lawfully and justifiably claimed, held that the Appellant had not disclosed such an enforceable interest and yet evidence on record showed otherwise; 2. That the Court below erred in both law and fact when it held that the arguments the Appellant had advanced in the matter should have been raised pursuant to Section 106 of the Banking and Financial Services Act, Chapter 387 of the Laws of J12 of 25 Zambia which according to the Court was the only way that the Appellant could have lawfully established his claims; 3. That the Court below erred in both law and fact when it held that the Appellant's claims could not be heard and determined in a matter commenced by Originating Summons for removal of a caveat; 4. That the Court below erred in both law and fact when it held that the Appellant had not met the criteria that is set out in Section 76 of the Lands and Deeds Registry Act that would reveal that he has an enforceable interest in the property; and 5. That the Court below erred in both law and fact when it held that the Appellant had not discharged the burden of proof that is placed upon him to show cause when the caveat should not be removed, thereby directing the Registrar of Lands and Deeds to remove the caveat placed on Plot No.6878, Mapopo, Olympia 7. APPELLANTS ARGUMENTS 7. 1 Grounds one and four were argued together and the J13 of 25 Appellant's main argument was that he was a secured creditor as defined under section 2 of the Corporate Insolvency Act owing to the assignment of receivables of the Respondent company. The Appellant reasoned that the said process resulted in creating an equitable mortgage upon the disputed property, which in turn created a charge on the property thus creating an equitable interest and giving the Appellant the right to place a caveat on the disputed property. 7 .2 He cited the case of National Housing Authority v. Kelvin Macwani supra where it was held in line with Lord Denning's reasoning in the High Trees Case that: «Jn cases of promises which were intended to create legal relations and which, in the knowledge of the person making the promise, were going to be acted on by the party to whom the promise was made, and have inf act been so acted on. In such cases the courts have said these promises must be honoured. " 7.3 Therefore, the Appellant contended that contrary to the J14 of 25 decision of the lower Court, the evidence on record clearly shows that the Appellant has disclosed an enforceable, lawful and justifiable interest in the property and has thus met the criteria set out in Section 76 of the Lands and Deeds Registry Act. 7.4 Ground two and three were also argued together were it was argued the lower Court misapprehended the Appellant's arguments in the Court below. It was submitted that the Appellant could not have advanced his arguments pursuant to Section 106 of the repealed Act, because in the Court below, the Appellant was not challenging the liquidation schedule. That his arguments were advanced to show cause why the caveat should not be removed and if he had indeed sought to object to the liquidation schedule, he would have done it the right way. 7.5 The Appellant insisted that he had sufficient, enforceable and justifiable interest in the property to warrant lodging of a caveat by reason of the fact that he had made a ZMW2,000,000 investment in the Respondent company and J15 of 25 since the Respondent deliberately pledged false properties, the Appellant was justified in lodging the caveat to secure his interest. Thus, the caveat ought not to have been removed. 7 .6 In Ground five, the Appellant's main argument was that he had in fact adduced sufficient evidence to discharge the burden and standard of proof applicable to civil matters . He stated that he had demonstrated, at length, that he had an equitable, sufficient, enforceable and justifiable interest in the property hence he had the right to lodge a caveat to secure his interest. 8. RESPONDENT'S ARGUMENTS 8 .1 The Respondent relied on its heads of argument filed in opposition, and in ground 1 submitted that only a party with a caveatable interest in a property can place a caveat on it. That there must be a relationship between the property and the interest claimed. This means that the property must have been offered or intended to be used to satisfy the claimed interest. That the mere fact that the interest claimed concerns the owner of the property, does not create a caveatable J16 of 25 interest in the property. 8.2 The Respondent opined that caveats can affect people negatively which is why the law has been designed the way it has, to stop busy bodies or excited persons from carelessly entering caveats on people's property without proper reasons. That even possession of a favourable Judgment against someone does not entitle one to lodge a caveat over their property. 8.3 The Respondent submitted that there was simply no relationship between the interest claimed and the disputed property. That upon discovering the problems with the securities pledged to him, the Appellant wrongly placed a caveat on the subject property. 8.4 The Respondent made a long-winded submission in reply to grounds 3 and 4 . When summarized the argument is simply that since the Appellant is unable to prove a caveatable interest, and the Respondent is under compulsory liquidation, he should have pursued his claims under the provisions of the repealed Act. J17 of 25 9. APPELLANTS ARGUMENT IN REPLY 9.1 The Appellant replied agreeing that for one to have a caveatable interest on the property there must be a relationship between the property and the interest claimed. He cited the case of Pan African Building Society v Pemba Liapidaries Limited and Lapemba Trading Limited 161 which it was held as follows; ''It is clear from the provzswns of the Act and the authorities which have been cited, that for one to lodge a Caveat, he must have a Caveatable interest. Meaning a person must have a legal or equitable interest in the Property which is actual, current, sufficient, enforceable and justifiable." 9.2 The Appellant concluded that he had in fact discharged the burden of proof that is placed upon him to show cause why the caveat should not be removed and that he has shown that he was left with no choice but to extend his search at the Ministry of Lands beyond the false properties listed by the Respondent. J18 of 25 10. THE HEARING 10.1 At the hearing both parties relied on their heads of argument supporting their respective positions in this appeal. 10.2 Mr. Phiri on behalf of the Appellant submitted that serious triable issues were raised in paragraph 18 of the Appellants affidavit filed in opposition to the Respondents application to remove the caveat. (page 118 record of appeal). 10.3 That section 13 of the high Court Act requires that all issues presented to the Court must be heard. That the raised issues should have been committed to trial and witnesses called to testify. 10.4 Mr. Mweemba on behalf of the Respondent re-emphasised that the Appellant had no caveatable interest because the subject property was never pledged to him as security. 10.5 That the arguments relating to the perceived triable issues in paragraph 18 were never raised during trial and that in any event, the trial Court could not move in that matter sua moto because the Appellant was a financial institution under compulsory liquidation. 11. DECISION AND ANALYSIS 11.1 We have considered the Record of Appeal and the arguments J19 of 25 advanced by both parties. The trial Judge was quite right when she observed that the case at hand is simply an application for removal of a caveat and nothing more and we shall therefore address all the grounds of appeal as one. 11.2 Section 76 of the Lands and Deeds Act quite clearly explains who is entitled to place a caveat against a certificate of title and it reads as follows; 76. Any person- (a) claiming to be entitled to or to be beneficially interested in any land or any estate or interest therein by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise howsoever; or (emphasis ours) (b) transferring any estate or interest in land to any other person to be held in trust; or (c) being an intending purchaser or mortgagee of any land; may at any time lodge with the Registrar a caveat in Form 8 in the Schedule. 11.3 The law on this issue has been articulated in several cases and J20 of 25 is quite clear. The learned trial Judge referred to the case of Construction and Investment Holdings Ltd v William Jacks and Co. (Zambia) Ltd supra cited by the learned trial judge it was held that, "Only if a person has or purports to have an enforceable interest in land may be justified in interfering with the rights of the registered proprietor by lodging a caveat." 11.4 Further on this question the Appellant himself cited the case of Pan African Building Society v Pemba Liapidaries Limited and Lapemba Trading Limited supra in which this Court emphasised that the person placing the Caveat must have a legal or equitable interest in the property which 1s actual, current, sufficient, enforceable and justifiable. 11.5 In the case of Morgan Naik v Amadeaus International Limited171 a former director of the Respondent company placed a caveat against the company property. He claimed that at inception of the company he had financially contributed towards the purchase of the said property . We granted the company 's application to remove the caveat on the ground that the mere fact that the ex-director had contributed towards the J21 of 25 purchase of the property did not give him a caveatable interest in the property. We held that even a shareholder of a company cannot place a caveat against the company's property merely because he is a shareholder. 11.6 Likewise, in the case of New Power Industries Limited v Shisholeka Mwamuchena Meckie 1s, the Appellant obtained Judgment against the Respondent and was further granted a writ of eligit accompanied by an interim attachment of property listing particular properties. The properties were all sold but a balance exceeding K732,000 remained owing on the Judgment debt. In a bid to secure the monies owed to him, the Appellant placed a caveat on one of the Respondents other properties. 11. 7 The Respondent reacted by filing an application to remove the caveat on the ground that the Appellant did not have a caveatable interest in the property because that particular property had not been attached to the writ of eligit. The High Court found in favour of the Respondent and ordered that the caveat be lifted. 11.8 The Appellant in the cited case had appealed claiming inter alia that he fell within the ambit of section 76 of the Lands and J22 of 25 Deeds Registry Act as he could be said to have an interest in the property by virtue of the beneficial claims which arise due to the sum of money the Respondent owed him. After considering the arguments of the parties we held as follows; . "Establishing an interest in property involves a direct link and in the absence of a legal document or court order establishing such a link, being a mere debtor does not by itself link the debtor's property to the creditor. The fact that the properties attached by the Court Order were not sufficient to cover the full amount of money owed by the Respondent, did not entitle the Appellant to place a caveat on any other property belonging to the Respondent. If the Appellant sought to execute against the said property, he should have obtained the necessary order from the Court. ". 11. 9 Amongst his arguments in casu, the Appellant herein, went as far as seeking refuge in the doctrine of promissory estoppel. He cited the case of Central London Property v High Trees House supra which established that when parties create an arrangement intending legal relations, and one party makes a promise known and acted upon by the other the court J23 of 25 considers it binding. 11.10 The Appellant has not shown any promise given by the Respondent in relation to the disputed property and despite his persistent and forceful arguments, the Appellant's reasoning as to how the disputed property ended up as a security for the K2 ,000,000 he deposited with the Respondent is quite flawed . There is absolutely no documentary evidence that the disputed property was pledged as security either by way of legal mortgage, equitable mortgage or by any charge or security document. 11.11 The Appellant failed to show that he had a caveatable interest as required by section 76 of the Lands and Deeds Registry Act and the cited authorities. 11.12 The fact that the Bank of Zambia took possession of the Respondent as provided by the repealed Act was highlighted in the arguments advanced by the parties vis-a-vis the options available to creditors when Bank of Zambia takes possession of a financial institution and places it under receivership. 11.13 We addressed this issue in the case of Urvesh Jasvantal J24 of 25 Desai v Pan African Building Socie ty (In liquidation) (91 • We referred to the case of John Mutale v Access Financial Services (lOJ in which the Supreme Court opined that when Bank of Zambia took possession of the Respondent (Access financial Services) the Appellant (John Kanyanta Mutale) was required by law to follow the procedure provided by the repealed Act. We held as follows; "As correctly pointed out by the trial Judge the sections of law applicable to this matter in the repealed law and the current law are quite similar. There is nothing that suggests that a change in the reasoning as to how litigation with regards to banks over which the Bank of Zambia has taken possession. Once Bank of Zambia takes possession of a bank any litigation against such a bank is ring-fenced to ensure that the p rovisions of the Act No. 7 of 2017 are complied with. These provisions include how the assets of the bank will be distributed and the manner in which enforcement of judgements, if any, will be J25 of 25 conducted. For instance, where the process being undertaken by the bank of Zambia results in compulsory winding up or dissolution of the bank, section 132 of the Act prescribes the order of priority with regard to disbursements to the banks debtors." 11.14 It is clear that once the Respondent was placed into compulsory liquidation the Appellant should have considered his options under the repealed Act instead of lodging a caveat against a property over which he lacked a caveatable interest. 11.15 In the premises, we find no merit in this appeal and would dismiss it accordingly. ~----- · · · · · · · · · · · · · · · · · · · · · · · ................ . M. M. KONDOLO SC COURT OF APPEAL JUDGE B. M. ~JULA COURT OF APPEAL JUDGE ~~ ...................................... Y. CHEMBE COURT OF APPEAL JUDGE