National Drug Company Limited and Anor v Mary Katongo (Female Sole) (APPEAL NO. 79/2001) [2002] ZMSC 171 (5 June 2002)

IN THE SUPREME COURT FOR ZAMBIA APPEAL NO.79/2001 HOLDEN ATNDOLA (CIVIL JURISDICTION) B E TW EEN: NATIONAL DRUG COMPANY LIMITED AND ZAMBIA PRJV ATISATfON AGENCY 1 ST APPELLANT 2ND APPELLANT AND • MARY KA TON GO (FEMALE SOLE) RESPONDENT Coram: LEW ANIKA DCJ., CHIRWA, CIDBESAKUNDA JJS On 5th December, 200 l and 5th June, 2002. For the Appellants: No Appearance For the Respondent: No Appearance. JUDGMENT LEW ANIKA DCJ delivered judgment of the comi. • There was no attendance by counsel for the Appellants at the hearing of this appeal as they had filed a notice of non-attendance pursuant to Rule 69 of the Supreme Court of Zambia Act and also filed their heads of argument. There was no explanation for the non-attendance of counsel for the Respondent. In this appeal we shall refer to the 1st Appellant and the 2nd Appellant as the 1st Plaintiff and 2nd Plaintiff respectively and the Respondent as the Defendant which is what they were in the court below. - 12 - The evidence on record is that by an agreement in writing made on 21st November, 1995 between the 2nd Plaintiff and the Defendant, the Defendant agreed to purchase from the 1st and 2nd Plaintiff the property known as Stand 644 Parklands, Kitwe for the sum of K45,000,000.00. Clause 3 .1 of the agreement provided that the Defendant pays the sum of • K6,000,000.00 on the signing of the agreemen t. Clause 3.2 provided that • the Defendant pays K5,350,000.00 on 5th December, 1995. Clause 3.3. provided that the balance of the purchase price be paid within 90 days of the date of signing of the agreement. Clause 5 of the agreement provided that the Defendant pay to the 2nd Plaintiff occupational charges of K50,000.00 per month from the date of taking possession. Clause 7 of the purchase agreement provided as follows:- 7. Penalty 7. 1 Outstanding payment by MK not made within the agreed period stated in Clause 3 of these heads of agreement shall attract interest payments equivalent to the ruling Bank of Zambia Treasury rate on the day that such payment is due . 7 .2 If payment is not effected within 60 days after the scheduled date specified in clause 3 of these Heads of Agreement, amounts paid by MK with any accrned interest will be forfeited, and the Zambia Privatisaion Agency w ill institute measures to re-possess the property. - 13 - The Defendant did not pay the purchase price w ithin the time limits set out in the Head of Agreement and o n 3rd June, 1998 the advocates for the Plaintiff served a notice to complete on the advocates fo r the Defendant. Co mpletion did not take place and the Pla intiffs instituted proceedings • against the Defendant for possession of the property and for an Order that the sum of K28 million paid by the Defendant as deposit should be forfe ited to the 2nd Plaintiff in term s of cla use 7 .2 of the Heads of Agreement. The learne d trial Jud ge found that clause 7.2 is oppressive and perpetuates unjust enrichment and was an affront to public interest and public policy. She refused to enforce clause 7 .2 in its entirety and instead made the following • orders:- 2. 3. that the D efendant sho uld pay all the monies owing together with interest and occupational charges by 30th April, 1999 ; in default of such payment, the D efendant should deli ver vacant possession of the premises known as Stand No. 644 Parklands, Kitwe; that occupati ona l and penalty charges be recovered fro m the amount of K28 million already pa id by the D efendant and the rem ainder be paid to her. It is against these orders that the Plaintiffs are appealing. Counsel for the P laintiffs has filed three grounds of appeal namely: - J4 - (a) (b) ( c) that the learned trial Judge misdirected herself in law and fact in holding that clause 7.2 of the agreement between the t 1<l Pl~intiff ~nd the Defendant was oppressive and perpetrated unJust ennchment; that the learned trial Judge misdirected herself in law and in fact in ordering that the amount of K28,000,000.00 already paid by the Defendant be refu nded to the Defendant after recovery therefrom occupationa l and penal charges; that the learned trial Judge misdirected herself in law and in fact in holding that enforcing clause 7 .2 of the agreement by a public institution was an affront to public interest and public policy. These grounds were argued collectively by counsel for the Plaintiffs who submitted that the uncontested evidence on record shows that the agreement between the 2nd Plaintiff and the Defendant was entered into by the parties thereto vol untarily and freely and without any direct or indirect undue influence or coercion by either the 1st or 2nd Plaintiffs or both upon the Defendant. That the contract between the parties was therefore legal and enforceable at law and failure by the Defendant to meet the conditions thereunder amounts to a seri ous breach of the same. It is trite law that once the parties have voluntarily and freely entered into a legal contract, they become bound to abide by the terms of the contract and that the role of the courts is to give efficacy to the contract when one party has breached it by respecting, upholding and enforcing the contract. • • - JS - He referred us to a passage in the book by Ewan Mckendrick Contract Law 3rd edition at page 3 which reads: "The law of Contract is perceived as a set of power-conferring rules which enable individuals to enter into agreements of their own choice on their own terms. Freedom of contract and sanctity of contract are the dominant ideologies. Parties should be as .fi·ee as possible to make agreement on their own terms without the interference of the courts or parliament and their agreements should be respected, upheld and enforced by the courts. " He also referred us to the case of PRINTING AND NUMERICAL REGISTERING CO VS SIMPSON (1875) LRR 19 EQ 462 where Sir George Jessel observed as follows: - ''// there is one thing more than another which public policy requires, it is that men ojjidl age and competent understanding shall have the utmost liberty in contracting and that their contract when entered into freely and voluntarily shall be held sacred and shall be eriforced by courts ofjustice." Counsel submitted that in the absence of evidence of force coercion, duress or undue influence on record, the learned trial Judge ought to have respected, upheld and enforced the agreement made between the 2nd P laintiff and the Defendant in its entirety. Counsel conceded that in many cases the courts have refused to uphold and enforce contracts which are contrary to "public policy" but he submitted that the agreement entered into between the 2nd P laintiff and the - 16 - Defendant and in particular clause 7 .2 thereof is not in any way contrary to "public policy." He referred us to the definition of "public policy" contained in the judgment of EGERTON VS BROWNLOW (1853) 4H. L. C.a.s 1 which stated that: • "Public policy is that principle of the law which holds that no subject can lawfully do that which has the tendency to be injurious to the public or against the public good, which may be termed as it sometimes has been, the p olicy of the law, or public in relation to the administration of the Law." He said that there was no evidence on record to show or suggest that the agreement entered into between the 2nd Plaintiff and the Defendant and in particular clause 7 .2 thereof as "injurious to the public or against the public good .... in relation to the administration of the law." He then went on to give an illustration of the contracts which the courts have struck down as • being contrary to public policy s uch as contracts contrary to good morals, contracts prej udicial to famil y life, contracts to commit a crime or civil wrong, contracts prejudicial to the administration of justice, contracts prejudicial to public rel ations and contracts in restraint of trade. He submitted that the agreement which is the subject of these proceedings does not fall in any of these categories. He also submitted that the issue of unjust enrichment as held by the learned trial Judge does not arise at all in this ' ' . - 17 - D. M. Lewanika DEPUTY CHIEF JUSTICE ~ D. K. Chirwa SUPREME COURT JUDGE L. Pq~ibesakunda SUPREME COURT JUDGE