Posa Estates Ltd and Ors v First National Bank Zambia Limited [2020] ZMCA 177 (20 November 2020)

IN THE COURT OF APPEAL OF ZAMBIA HOLDEN AT LUSAKA (Civil Jurisdiction) APPLICATION NO 73/2020 IN THE MATTER OF: AN APPLICATION UNDER ORDER XXX RULE 14 OF THE HIGH COURT RULES CHAPTER 27 OF THE LAWS OF ZAMBIA IN THE MATTER OF: A THIRD PARTY MORTGAGE, FURTHER CHARGE, SECOND FURTHER CHARGE AND THIRD FURTHER CHARGE OVER FARM 246A "KAJULA" MAZABUKA IN THE NAME OF CONSTANCE ANN PINKNEY, EWEN JOHN PINKNEY AND KATHRYN JEAN SHERRIFF IN THE MATTER OF: FORECLOSURE AND SALE OF MORTGAGED PROPERTY BETWEEN: POSA ESTATES LTD KATHRYN JEAN SHERRIFF EWEN JOHN PINKNEY PAUL NICHOLAS SHERIFF CONSTANCE ANN PINKNEY t 20 NCV 22J RF:G,'3 TRY x 50067, L)S 1ST APPLICANT 2ND APPLICANT 3RD APPLICANT 4TH APPLICANT 5TH APPLICANT AND FIRST NATIONAL BANK ZAMBIA LIMITED (cid:9) RESPONDENT CORAM: CHISANGA JP, MULONGOTI AND SIAVWAPA, JJA On 13th and 20th November, 2020 FOR THE APPLICANTS: MR. M. KATOLO OF MESSRS MILNER AND PAUL LEGAL PRACTITIONERS FOR THE RESPONDENT: MISS K. NALONDWA OF MESSRS A. M. W LEGAL PRACTITIONERS (cid:9) RULING SIAVWAPA, JA, delivered the Ruling of the Court. Cases referred to: 1. Chainama Hotels Limited and 3 others v Inuestrust Merchant Bank (Z) Ltd Appeal No. 105/2009. Works referred to: 1. Haisbury's Laws of England 3rd Edition Vol. 27 2. R. E. Megarry; A Manual of the Law of Real Property, 2nd Edition (London: Sweet & Maxwell) This is an application on behalf of the Applicants, who were the Appellants in the appeal before us which has given rise to this application. We delivered our Judgment on 23d October 2020 dismissing the Appeal in its entirety. Dissatisfied with the outcome, the Applicants have moved us by Notice of Motion for leave to appeal to the Supreme Court pursuant to Section 13(2) of the Court of Appeal Act No. 7 of 2016. The Notice of Motion is accompanied by an affidavit in support deposed to by one Paul Nicholas Sheriff. R2 In paragraph 6 of the affidavit in support, it is deposed that the proposed appeal raises a serious point of law of public importance. The grounds, upon which the application is premised, as set out in the affidavit in support, are: (a) The duty of the mortgagee to account in cases where the debt due is far less than the value of the mortgaged property and (b) Whether the Respondent is entitled to Judgment when the trial court found as a fact that there was no conclusive evidence in the history and composition of the sums claimed USD 823,393,44 and K9, 869.46 as at 22nd August 2019. Counsel for the Respondent opposed the application viva voce on a point of law with the Court's concurrence. The gist of Mr. Katolo's arguments was that by holding that there was no duty for a mortgagee to account after a sale pursuant to an order of foreclosure on the mortgaged property, we contradicted the Supreme Court Judgment in the case of Chainama Hotels Limited and 3 others u Investrust Merchant Bank (Z) Ltd. 1 According to Mr. Katolo the Supreme Court of Zambia, in that Judgment, clearly held that there was a duty for a mortgagee to R3 account after a sale made pursuant to an order of foreclosure on a mortgaged property. In his highly charged viva voce arguments, Mr. Katolo alleged that we took a startling and offensive position against settled law in relation to the Chainama Hotels case (Supra). It was therefore, his submission that in order for the apparent contradiction to be settled, it was necessary for the Supreme Court of Zambia to reconcile the two positions. This is the basis of the argument for "a point of law of public importance" and "a reasonable prospect of success" in terms of Section 13(2) (a) and (c) of the Court of Appeal Act. On her part, Miss, Nalondwa's submission was simply that she did not think that the arguments by the Applicants had satisfied the criteria set out by Section 13 (2) of the Court of Appeal Act to warrant the granting of leave to appeal. She accordingly urged us to dismiss the application with costs. We first wish to point out that Mr. Katolo's assertion that we made a startling proposition which offends against settled law is most unfortunate and quite disrespectful to the Court. We say so because we believe learned Counsel had not fully appreciated our Judgment and that of the Supreme Court in the Chainama Hotels Ltd (Supra) which in our view are not at variance. R4 In our Judgment we distinguish the power of sale exercised by a mortgagee pursuant to the mortgage deed or Section 85(i) (b)of the Banking and Financial Services Act before an order of foreclosure (absolute) is made and the sale by order of Court following an order of foreclosure absolute. See lines 21-24 of our Judgment at page 30 of the Record of Application, line 1-4 at page 31 and sub- paragraphs (b) and (c) of the conclusion at pages 34 and 35 of the Record. In the Chainama Hotels case, at page 69 line 25 and page 70 lines 1 to 6 of the Record, the Supreme Court of Zambia stated as follows; "The Kabwe property was the subject of Court proceedings whereby the Respondent obtained foreclosure. However, the Respondent opted not to foreclose but to exercise its power of sate. The Lusaka property was never the subject of the earlier court proceedings but the Respondent opted to exercise its power of sale under the mortgage" (underlining ours for emphasis). In both cases, no order of foreclosure was made as the mortgagees opted to exercise their power of sale and hence the order to account in both sales. It will be noted that in the Chainama Hotels case, the Supreme Court quoted extensively from R. E. Megarry; A Manuel of the Law R5 of Real Property, 2nd Edition (London, Sweet & Maxwell) and Haisbury's Laws of England 3rd Edition Vol. 27. What comes out of the quotations is that a mortgagee's power of sale requires no court order and the power is given for the mortgagee's benefit to sell in good faith hence the duty to account. The account required is for the determination of what is owed to the mortgagee in principle, interest, costs, charges and expenses incurred by the mortgagee. Further, under the power of sale, if the mortgaged property is sold at a higher price than the amount of the debt, the mortgagee has a duty to pay back the excess amount to the mortgagor. After foreclosure however, the mortgagor/ mortgagee relationship comes to an end and we said in our judgment that an order of foreclosure absolute vests the mortgaged property absolutely in the mortgagee who can sell by a court order without a duty to account. We therefore find no point of law of public importance raised in our Judgment which the Supreme Court has not yet pronounced itself on. As regards the amounts due, the same goes to the settling of account between the mortgagor and the mortgagee to determine the amount due. This was done as reflected in the originating R6 summons. We do not think that the argument in this regard presents any prospect of success on appeal. In conclusion, we take the view that counsel for the Applicant attempted to mislead the Court in his spirited arguments that our Judgment had contradicted that of the Supreme Court of Zambia in the Chainama Hotels case when in fact not. We strongly frown upon this kind of advocacy from counsel whose primary duty is to the Court. Ultimately, we find no merit in the application for its failure to meet the criteria set out in Section 13 of the Court of Appeal Act. Leave to appeal to the Supreme Court is accordingly refused with costs to the Respondent. F. M. CHISANGA JUDGE PRESIDENT J. Z. MU ONGOTI (cid:9) COURT OF APPEAL JUDGE (cid:9) M. J. SIAVWAPA COURT OF APPEAL JUDGE R7