Panial Enterprises Ltd and Anor v Cavmont Bank Ltd (Appeal 129 of 2015) [2018] ZMSC 400 (17 January 2018)

J1 IN THE SUPREME COURT OF ZAMBIA APPEAL NO. 129/2015 HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: (aL1 s ■“ cm jrt PANIAL ENTERPRISES LIMITED BETWEEN FUNGA AND 1st APPELLANT 2nd APPELLANT CAVMONT BANK LIMITED RESPONDENT Coram: Chibomba, Hamaundu and Malila, JJS On 2nd December 2015 and 17th January, 2018 For the appellant : Mr G. S. Cornhill, Messrs Wilson & Cornhill For the respondent : Mr L. Zulu, Messrs Tembo Ngulube & Associates JUDGMENT Hamaundu JS, delivered the judgment of the Court Cases referred to: Zulu v Avondale Housing Project Limited [1982] ZR 172 This appeal is against an assessment by the Deputy Registrar of the High Court. J2 The events leading to this appeal are not in dispute, and are these: On 28th April, 2009, the respondent availed to the 1st appellant overdraft facilities of KI billion (unrebased). These were valid up to 31st January, 2010. On the same day, the respondent advanced to the 1st respondent a loan of K500million. This was payable over 24 months, that is up to 3rd April, 2011. On 10th September, 2009 the overdraft facility and the loan were restructured and consolidated into a loan of K2,450,000,000. The respondent then availed the 1st appellant two overdraft facilities; one of K450million and another of K50million. This was intended to enable the 1st appellant settle an outstanding balance of K170million on the money that had been advanced to the 1st appellant to purchase a farm. The loan was to be repaid in sixty months. All these facilities were secured by securities provided by the 1st appellant, the 2nd appellant and another person known as Mbetwa Funga. On 22nd July, 2011 the said loan and the two overdrafts were again restructured and converted into a loan of K3,900,000,000. This was payable in sixty monthly instalments of KI 14,470,161.17. The repayments should have ceased on 20th February, 2017. On the same day, 22nd July, 2011 the respondent availed the 1st appellant an J 3 overdraft facility in the sum of K850million, as working capital. The facility was to expire on 30th June, 2012. There was default on the part of the 1st respondent in servicing the loan and the overdraft. The respondent then, on 21st August, 2012 issued a formal demand for the sum of K5,426,246,049.15 allegedly owing by the 1st appellant on the facilities. The respondent followed this with a mortgage action for payment of the sum of K5,522,877,828.10; or enforcement of the securities. In defence, the appellants raised several issues; but one that is relevant to this appeal was that the respondent had charged penal interest. The court found without doubt that the appellants owed the respondent money but that the restructured amount of K3,900,000,000 and K850,000,000 were not correct as they contained penal interest which the respondent had charged. The court held that it was illegal to charge penal interest. It ordered that the correct amount owed, excluding penal interest, be ascertained by the Deputy Registrar on assessment. Before the Deputy Registrar, the respondent filed re-computed accounts; starting with the restructured loan of K2,450,000,000 and J4 the overdraft facilities of K450,000,000 and K50,000,000. The Registrar was of the view that even these starting figures had contained penal interest. She ordered the respondent to file fresh statements of account starting from the initial amounts advanced. This, the respondent did. Upon examining them, the Deputy Registrar found that the opening balances were as follows: The amount owed on the overdraft on the current account as at January, 2009 was KI,988,252.23 (rebased); and the amount owed on the loan account was K500,000 (rebased). The Deputy Registrar further found that when the loan was restructured on 5th August, 2011 the balance on the current account and the loan account put together should have been K2,868,411.46 (rebased) and not the sum of K3,045,203 (rebased) that was arrived at by the respondent. She found that the final figure was incorrect because the respondent had applied interest on the incorrect figure of K3,045,203. She then ordered that interest be computed on the sum of K2,868,411.46 in order to arrive at the correct amount owing. The appellants are not happy with the Deputy Registrar’s findings, arguing that the opening balance should have been a much lower figure. J 5 They have advanced three grounds of appeal as follows: (1) The learned Deputy Registrar erred in law and fact by finding that the opening balance was KI,988,435.51 instead of K982,407. (2) The learned Deputy Registrar erred in law by failing to address herself to the disputed credit of K389,988.91 which could not be located on the re-computed statement of account. (3) The learned Deputy Registrar erred in law by holding that the interest was not compound in the re-computed statement dispute the fact that loan repayments with an interest component were included in the statement and further interest applied to the accounts. Submitting in the first ground appeal, Mr Cornhill, learned counsel for the appellant, acknowledged this court’s reluctance to reverse factual findings of a trial court; as was held in Zulu v Avondale Housing Project Limited11) and several other authorities. He went on to submit that in the same cases we have said that an appellate court can interfere with findings of fact of a trial court if they are perverse, or were made in the absence of relevant evidence; or were made on a misapprehension of facts. With that argument learned counsel attacked the Deputy Registrar’s finding that the opening balance on the 1st appellant’s account in January, 2009, was a debit of KI,955,477.47. Counsel compared the evidence presented by both sides on the issue, namely; the appellants’ evidence that the J6 overdraft facility for the period January, 2008 and December, 2008 was KI,000,000 and that when the facility expired, the account had a debit balance of K982,407 and not KI,955,477. Against this was the respondent’s evidence that the overdraft facility was KI,000,000 and that, when the facility expired, the account was overdrawn by KI,900,000. Counsel argued that the contention by the respondent flew in the teeth of the facility agreement itself because there was no way that the account could be overdrawn beyond the limit of the facility. He argued that no reasonable court ought to believe such testimony. On the other hand, counsel argued that the contention by the appellants was more consonant with logic in that their evidence that the balance was K982,407 was within the limit of KI,000,000 set by the facility. Responding to Mr Cornhill’s argument, Mr Zulu, learned counsel for the respondent, submitted that the Deputy Registrar’s finding was supported by the following pieces of evidence; first, there was the testimony of the respondent’s Recoveries and Rehabilitations Manager, Martha Lungu Sichone, who testified that the customer, that is, the 1st appellant, was allowed to withdraw on an unfunded account even without agreement due to the relationship that the J 7 customer had with the bank. Secondly, one of the bank statements that was produced clearly showed that by April, 2009 the current account had a debit balance of KI,958,477,466.22 (unrebased) and; thirdly, that the activities on the account as reflected by the bank statements showed that the 1st appellant continuously presented cheques to the respondent for payment even when the current account was in debit balance. Counsel further argued that in any event, it was within the respondent’s right to waive its right to strict adherence to the overdraft limit set in the facility agreement. We were referred to the 2004 edition of Chitty On Contracts, on the topic of waiver, in support of that submission. We have considered the argument on both sides in this ground of appeal. This ground of appeal is against a finding of fact by the Deputy Registrar. As rightly submitted by counsel for the appellants, we have said in Zulu v Avondale Housing Project1 X), and in several other cases, before and after that case, that an appellate court will not lightly interfere with or reverse findings of fact made by a trial court unless the findings are perverse; or are made in the absence of relevant evidence or are made on a misapprehension of facts. The J 8 opposite of this proposition is that findings of fact made by a trial court will be interfered with or reversed if it is established that they were indeed perverse or were made in the absence of relevant evidence, and so on. Perusal of the portion of the judgment where the Deputy Registrar dealt with this issue shows that the Deputy Registrar’s intention was to ensure that the balance on the current account as carried over from December, 2008 to January, 2009 did not contain penal interest, in line with the directive of the trial judge. The Deputy Registrar physically examined the documents of accounts on record. She found that one document showed that on 31st December, 2008 there was a debit balance, on the account, of KI,988,252. She found another statement of account showing that earlier that year, in January, 2008 the account had opened with a debit balance of K982,407.95. She also found a statement of account which showed that in January, 2009 the debit balance was KI,988,435.51. The Deputy Registrar observed that various payments were made on the account, such that as at 4th September, 2009 the last entry on the account according to the statement on record was a debit balance of KI,955,477.47. She went on to hold that, there being no evidence to demonstrate that there was penal J 9 interest in the opening balance in 2009 she accepted the opening balance reflected in the respondent’s re-computed statement, namely; the debit figure of KI,988,252.23. Building on this, the Deputy Registrar traced the accounts up to the restructuring of the facilities dated 7th January, 2010 and 5th August, 2011 whereupon the Deputy Registrar found that the proper figure upon the second restructuring should have been K2,868,411.46 and not the figure of K3,045,203.00 that was reflecting in the respondent’s re-computed statement. It is clear, then, that the Deputy Registrar’s finding was arrived at upon an examination of the real evidence on record; and not upon a mere preference of the respondent’s testimony over that of the appellants. It cannot, therefore, be said that the finding of fact was perverse; or that it was made in the absence of material evidence; or that it was made on a misapprehension of facts. Consequently, we find no merit in the first ground. We dismiss it. The second ground of appeal, according to counsel for the appellants, is founded on the respondent’s averments in its affidavit in reply to the appellants’ affidavit in apposition. Counsel submitted that in the respondent’s averments, there was admission that at J 10 some point the current account had a credit balance of K389,988.91 which was then transferred, and applied to the loan account which had a debit balance of K4,499,350 on 31st March, 2014. It was averred that this had the effect of reducing the loan account balance to K4,144,845.32. Counsel submitted that in their earlier affidavit, the appellants had contended that the respondent had not accounted for two sums of K380,602.10 and K89,267.39 which they had paid to the account. It was counsel’s submission that it is this contention that prompted the respondent to make those averments in the affidavit in reply. Counsel argued that, although the two sides put forward their respective positions on the issue the Deputy Registrar failed to adjudicate on it. In response to that submission, counsel for the respondent argued that the respondent had adequately explained how the two payments amounting to K389,869.49 had created a credit balance on the current account in that amount which, however, had promptly transferred to the loan account which had a debit balance, thereby reducing the debit balance in that account. Counsel argued that this was standard practice by a bank which generally had a lien on all accounts that the customer held within the bank. J11 While we agree with the appellants that the Deputy Registrar appeared to have overlooked this issue, we accept that the respondent gave a very valid explanation as to what happened to the credit; that it was applied to reduce the loan account which was in debit. As the respondent has correctly argued, a bank has a lien on the account of its customers held with it. Hence, it was perfectly logical for a bank to move money credited in one account to another of the customer’s account whose repayment was overdue. We, therefore, find no merit in the second ground of appeal. In the third ground of appeal, the single argument by learned counsel for the appellant was that in view of the statement by the respondent’s witness that the restructured sum of K2,450,000 had contained interest then the Deputy Registrar erred when she held that the re-computed statement of account did not contain compound interest. We shall respond to this argument summarily. As we have shown when we were dealing with the arguments in the first ground of appeal, the Deputy Registrar traced the amounts owing on the accounts from as far back as January, 2008. In the process, she was even examining the columns in the submitted statements of account J 12 which provided for interest. She calculated the figures without interest and came to the figure of K2,868,411.46 which she said should be the figure on which simple interest should be applied and not K3,045,203.00. Therefore, there is no basis for the arguments by the appellants that the figure still contained penal interest. We find no merit in the third ground of appeal. All in all, the appeal has failed on all grounds. We dismiss it with costs to the respondent, to be taxed in default of agreement. H. Chibomba SUPREME COURT JUDGE E. M. Hamaundu SUPREME COURT JUDGE Dr. M. Malila, SC SUPREME COURT JUDGE