Silwamba and Anor v Stanbic Bank Zambia Ltd (Appeal 205 of 2016) [2017] ZMSC 273 (3 May 2017)

XU IN THE SUPREME COURT OF ZAMBIA APPEAL NO. 205/2016 HOLDEN AT KABWE (Civil Jurisdiction) BETWEEN: CHILUFYA DAINESS BWALYA SILWAMBA 1st APPELLANT PROSPER INVESTMENTS LIMITED 2nd APPELLANT AND STANBIC BANK ZAMBIA LIMITED RESPONDENT Coram: Hamaundu, Wood, Musonda , JJS. On 4th April, 2017 and 3rd May, 2017. For the Appellant: Mr. M. Nzonzo - Messrs ICN Legal Practitioners For the Respondents: Mr. A. Siwila - Messrs Mambwe Siwila & Lisimba Advocates JUDGMENT Wood, JS, delivered the judgment of the court. Cases re ferred to: 1. Zambia Seed Company Limited v Chartered International (PVTO Limited [1999] Z. R. 151. V 2. African Banking Corporation (Z) Limited (T/A Bank ABC v Plinth Technical Works Limited and others SJ No. 28 of 2015 Legislation referred to: 1. High Court Rules Cap 27 of the laws of Zambia Orders 5 and 18. Works referred to: 1. Volume 32 of Halsbury’s Laws of England, 4th Edition Paragraphs 725 to 2. Order 45 rule II Rules of the Supreme Court 1999 Edition This is an appeal against a ruling of the High Court discharging an ex parte order staying execution of a judgment and restoration of Subdivision No. 36 of Farm 401a Lusaka to the 1st appellant. The 1st appellant is the owner of Subdivision No. 36 of Farm No. 401a, Lusaka. She is a director of the 2nd appellant company. The 2nd appellant obtained various facilities from the respondent for its business operations over a period of time. The 1st appellant surrendered her title deeds relating to Subdivision No. 36 of Farm No. 401a, Lusaka to the respondent as security. A third party mortgage was duly created and registered. The 2nd appellant also surrendered its title deeds relating to the Remaining Extent of V Farm No. 3546 Lusaka to the respondent as security. A mortgage and an agricultural charge were duly registered in respect of the Remaining Extent of Farm No. 3546 Lusaka by the respondent. The 2nd appellant was unable to keep up with its repayment obligations. The respondent commenced a mortgage action to recover its money. A consent judgment was entered on 3rd April, 2014 against the appellants and a company called Bullion Bureau De Change Limited which, for some reason, is not a party to this appeal, for the sum of USD3,829,710.95. A repayment plan was agreed upon and in default thereof the 1st and 2nd respondents agreed to deliver vacant possession of Subdivision No. 36 of Farm No. 401a, Lusaka and the Remaining Extent of Farm No. 3546 Lusaka to the respondent to foreclose and exercise its right of sale. The appellants were unable to keep up with the repayments agreed upon in the consent judgment. The parties then executed a consent order varying the terms of the consent judgment. The order was signed by the learned judge on 11th June, 2015. The appellants were still unable to keep up with the repayments. Sometime in November 2015, the appellants through their J4 advocates AB & David asked the respondent for an extension of time within which to repay the money as they were in the process of obtaining a facility through another bank called Banc ABC. This facility fell through. It must however be mentioned that during the intervening period between the execution of the consent judgment and the letter from AB & David in November 2015, the 2nd appellant’s account number 023/20/340349/01 received various credits which reduced it to a zero balance as at 9th February, 2015. This account showed a zero balance, but the 2nd appellant maintained several loan accounts whose balances were consolidated in the judgment sum of US$3,829,710.95 and the 2nd appellant would apply funds to the loan account as and when they were received to reduce the judgment sum. Even though the balance on loan account number 023/20/340349/01 was expunged on 26th September, 2014 the 2nd appellant’s indebtedness had not been fully paid. The respondent converted the Dollar loan into Kwacha on 3rd September, 2015 for ease of administration and as at 27th April, 2016 the debt stood at K38,131,408.16. The appellants are not challenging the 2nd appellants’ indebtedness to the respondent. Their main concerns J5 were that at the point when the account achieved the zero balance, the 1st appellant’s title deeds should have been released and that the respondent should not have rushed to dispose of the Remaining Extent of Farm 3546 Lusaka as there were various movable assets which could have been disposed of first and that in any event, the respondent should have first appointed a receiver and manager as there was an agricultural charge over the property. The appellants have advanced four grounds of appeal in respect of this appeal. The first ground is that the learned judge erred in law and in fact when he held that the application on account of matters occurring after the judgment did not state grounds of the matters in the summons. The second ground is that the learned judge erred in law and in fact when he concluded that the appellants’ application before the court below was to have the court set aside the consent judgment of 3rd April, 2014 and consent order of 11th June, 2014 without regard to the provisions of Order 45 rule 11 of the Rules of the Supreme Court that enables the court to stay execution of judgment, deal with the matters in J6 question and make any order that would be just in the circumstances of the case. The third ground of appeal is that the learned judge erred in law and in fact when he found no merit in the application for matters occurring after judgment. The fourth ground of appeal is that the learned judge erred in law and in fact when he consequently dismissed the application for leave to amend the affidavit in support of application for matters occurring after judgment on the ground, inter alia, that the same had come too late in the day. The appellants argued that Order 45 rule 11 RSC allowed them to make an application for matters arising after judgment. Order 45 Rule 11 states as follows: “Without prejudice to Order 47 rule 1, a party against whom a judgment has been given or an order made may apply to the Court for a stay of execution of the judgment or order or other relief on the ground of matters which have occurred since the date of the judgment or order, and the Court may by order grant such relief and on such terms, as it thinks just. ” They argued that it was evident that a party was at liberty to apply for a stay of execution of judgment on the ground that J7 matters had occurred after judgment which warrant such as an order. This ground, they argued, was sufficiently stated in the summons for the application. The facts that support the ground were contained in the composite affidavit in support and the subsequent affidavit in support of application for leave to amend the composite affidavit. It was therefore their argument that the lower court erred in law and fact when it held that the ground for the application was not stated in the summons for the application. The respondent has on the other hand in relation to the first ground of appeal argued that the learned judge was on firm ground when he held that the appellants had not stated the grounds of the matter in the summons and instead left the grounds of the matter to be deciphered by the court from the affidavit in support filed with the summons on matters occurring after judgment. The respondent has argued that the appellants have not stated the grounds in the summons and as such cannot fault the judge below for holding as he did. We see no merit in the first ground of appeal. Although the learned judge took the view that it was unsatisfactory not to state J8 the grounds upon which the application was being made in the summons, the summons shows that the appellants intended to rely on the facts contained in the affidavit as their grounds for the application. The wording of the summons was probably not crafted in the best or neatest of ways, but it does convey the message that it is an application in connection with matters occurring after judgment and an order for stay pending the hearing of an application for matters occurring after judgment on the grounds stated in the affidavit and to that extent we agree with the appellants that the grounds are indeed stated. The learned judge did not find the omission of the grounds in the summons to be a fatal error on the part of the appellants. We say so because he later stated in his ruling that he had read the affidavit in support of the summons but could still not find any grounds of the matters occurring after the judgment in the affidavit in support. We must however mention that the summons as drafted meets the minimum standard for a summons as it sets out why the court is being moved and that the reasons for doing so are in the affidavit in support. The learned judge cannot be faulted for the decision he reached, as it is quite apparent from his ruling that he considered J9 what was contained in the affidavit in support, but disagreed with the appellants that the affidavit had disclosed any grounds for matters arising after judgment. The fact that he disagreed with the appellants does not mean that he did not consider the summons and the affidavit in support. The second ground of appeal attacks the conclusion reached by the learned judge that the application was intended to have the court set aside the consent judgment of 3rd April, 2014 and the consent order of 11th June, 2014 without having regard to the provisions of Order 45 rule 11 of the RSC which enables the court to stay execution of a judgment, deal with the matters raised and make any order that would be just in the circumstances of the case. The appellants argued that the provisions they relied upon are clear on their effect upon a judgment of the court. The parties had executed a consent judgment and it was not the intention of the appellants to have the judgment challenged or set aside as concluded by the court below. They argued that the objective of the application was to bring to the attention of the court cited J10 matters that occurred after the judgment was entered and have the court deal with them accordingly and make a determination on the appropriateness of enforcing the judgment in view of the matters raised. Whilst determining the matters, the court has and had the discretion to stay execution of the consent judgment pending the determination of the said matters captured in the supporting affidavits. This, they argued, could amount to challenging the consent judgment which can only be properly done by way of commencing a fresh action. The respondent has argued that the second ground of appeal has no merit because the respondents were attempting to set aside a consent judgment when they should have commenced a fresh action if they wanted to set aside the consent judgment. The respondent then referred the Court to the case of Zambia Seed Company Limited v Chartered (PVT) Limited1 in which we held that by law the only way to challenge a judgment by consent would be to start an action specifically to challenge that consent judgment as its authority in support of its argument. Jll We agree with the appellants that the provisions relied upon are clear on their effect upon a judgment of the court. We also agree with the appellants that it was not their intention to have the consent judgment challenged or set aside. We accept that the objective of the application was to bring to the attention of the court the cited matters that occurred after the judgment was entered and have the court deal with them accordingly and make a determination on the appropriateness of enforcing the judgment in view of the matters raised. The argument that the court’s discretion to stay execution of the consent judgment pending the determination of matters raised in the affidavit does not amount to challenging the consent judgment is valid as what the appellants were seeking to do was to bring to the attention of the court matters that had occurred after judgment. We therefore agree that there is merit in this ground. The learned judge took a rather simplistic approach to the issue that was being raised namely, that the 1st appellant had effectively cleared her indebtedness to the respondent and that there was therefore no need for the respondent to hold on to the title deeds relating to Subdivision No. 36 of Farm No. 401a, Lusaka as security. It would have been J12 helpful if the learned judge had considered the arguments that were being advanced on this point and addressed them instead of simply dismissing them by holding that he could not find any grounds of the matters occurring after the judgment. The argument by the respondent that the appellants’ application on account of matters occurring after judgment was futile because of the consent judgment is misplaced because 0.45 rule 11 applies to all judgments or orders whether obtained by default, consent or after trial. An application on account of matters occurring after judgment recognizes the fact that there is a judgment in place but also recognizes that certain matters may have occurred after judgment which, if not dealt with, may prejudice a party against whom a judgment or an order has been made if not addressed prior to enforcement. Matters occurring after judgment must be distinguished from an action to set aside a consent judgment which is in effect an action challenging or seeking to set aside a consent judgment whereas an application on account of matters occurring after judgment does not seek to challenge or set aside a judgment. As matters stand, the appellants must have been J13 justifiably at a loss as to why their arguments were dismissed in the court below without any basis. It is this quest for reasons that has given rise to the third and fourth grounds of appeal. The third and fourth grounds of appeal essentially attack the judgment on the basis that the affidavit showed that there were matters which had occurred after judgment which needed to be dealt with and that the application to amend the affidavit had not come too late in the day as such applications could be made at any stage of the proceedings. We shall therefore combine these two grounds and address them simultaneously. The appellants have argued that the critical matter which had arisen was whether the respondent could proceed to enforce a sale over a third party mortgaged property whose indebtedness had been amortized following judgment. The appellants contended that the loan account that gave rise to the third party mortgage executed by the first appellant had been reduced to a zero balance post judgment as the second appellant had amortized its indebtedness together with interest on the sums secured by that mortgage. They argued that the first appellant had a right to J14 redeem the mortgaged property after the loan agreement sum that gave rise to the mortgage had been paid off. As such, the respondent did not hold a registered mortgage against the property and the foreclosure proceedings were misconceived and should be declared null and void. The respondent anchored its argument in connection with the third ground on the facts before the court below and came to the conclusion that there was no merit in the third ground of appeal. When it came to the fourth ground, the respondent argued that the discretion by a judge to allow a party to amend is not without limitation. The respondent argued that the proposed amendments had no relevance as they related to movable assets which were subject to an agricultural charge and in any event would not have changed anything as there was a consent judgment executed by the parties. We have considered the argument which suggests that there is no money due to the respondent in respect of Subdivision No. 36 of Farm No.401a, Lusaka as the bank statement shows a zero balance. The affidavit in opposition sworn on behalf of the J15 respondent on 27th April, 2015 by Reuben Matale Malindi on the other hand states that the third party mortgage over Subdivision No. 36 of Farm No. 401a, Lusaka was intended to be secured for the entire indebtedness of the 2nd Appellant, which indebtedness was acknowledged by the appellants’ previous advocates in an undated letter to the respondent’s advocates received on 18th November, 2015. The admission of the debt is after the respondent presented the second appellant with a bank statement showing a debit balance of K4,410,672.43. The statement of 14th November, 2015 is long after the earlier statement of 9th February, 2015 which the appellants were relying on as proof of a zero balance. It was therefore the respondent’s position that the total indebtedness had not been paid in full and as such the respondent was entitled to exercise its rights as mortgagee over Subdivision No. 36 of Farm No. 401a Lusaka together with the Remaining Extent of Farm No. 3546 Lusaka. The appellants have not challenged the affidavit in opposition of 27th April, 2016. They have instead challenged the fact that the respondent was about to exercise its rights as mortgagee over Subdivision No. 36 of Farm No. 401a, Lusaka when the mortgage had been paid in full. The exhibits attached to the J16 appellants’ composite affidavit of 31st March, 2016 show that various loans were advanced to the second appellant which were secured by a third party mortgage over Subdivision No. 36 Farm No. 401a, Lusaka and the Remaining Extent of Farm No. 3546 Lusaka in addition to other securities demanded by the bank. In clause 8 of the third party mortgage the parties agreed that the security would be a continuing security to the respondent to cover advances and banking facilities made or to be made to the second respondent. Clause 8 reads as follows: “8. THIS security shall be a continuing security to the bank to cover advances and other banking facilities made or to be made thereafter to the Customer notwithstanding any settlement of account or variation, or extension or replacement of the facility herein or other matter or thing whatsoever and shall not prejudice or affect any security which the bank may now hold or at any time hereafter hold in respect of further and future advances made or to be made by the Bank or in respect of the moneys hereby secured, or any of them or any part thereof respectively.” We have, in African Banking Corporation (Z) Limited (T/A Bank ABC v Plinth Technical Works Limited and others SJ No. 28 of 20152 interpreted the expression ‘continuing security’ to mean ‘further facilities’ or ‘further advances.’ There is evidence from the facility J17 letters that ‘further facilities’ or ‘further advances’ were given to the second appellant and that Subdivision 36 of Farm No. 401a, Lusaka was going to be used as part of the security. The loan letter dated 20th May, 2010 stipulates that the respondent holds Subdivision Number 36 of Farm No. 401a, Lusaka “...as security for the entire Borrower’s indebtedness to the Bank from time to time.” The variation dated 12th August, 2009 states that “Security Held” and “’’Security Required” are hereinafter jointly to be referred to “the Security” and further states “In addition and without prejudice to any security already held by the Bank, the Bank requires the Security to cover all banking facilities granted to the Borrower, whether direct contingent and howsoever arising.” There is no dispute that the second appellant is still indebted to the respondent as can be seen from the correspondence on the record and the consent judgment that has not been satisfied. What is really in dispute as we see it is whether the respondent can exercise its rights as mortgagee over Subdivision No. 36 of Farm No. 401a, Lusaka. We must say right away that counsel’s arguments on this aspect of the appeal which are central to the whole case have not been helpful at all as they have not referred us J18 to the law or even a single authority on the relevant subject matter. The appellants have simply posited that the respondent should first sell movable property before moving on to the real property in order to settle the debt without any authority in aid of their argument. This is regrettable as arguments such as have been advanced must be supported by authorities. The respondent’s advocates have, on the other hand, advanced what can only be described as a lackadaisical response to the third and fourth grounds of appeal. The respondent merely recited the facts leading to this appeal. No attempt whatsoever was made to look up the authorities on the subject at hand. The respondent took the easy route of arguing that the third ground had no merit without really showing why that was so. Counsel for the respondent also argued that since there was an agricultural charge, the respondent could not legally be prevented from enforcing its rights as mortgagee. The significance of an agricultural charge in relation to a mortgage was however not argued. Much more is required and expected of counsel when dealing with litigation of this nature as a wooly argument is unaceptable. A cursory look at the common law on the subject would have revealed the rights and obligations of J19 parties where several mortgages are involved and some are paid off. The responsibility to undertake research should not be left to the Court as it is counsel’s foremost duty to undertake such research in order to assist the court in arriving at a just decision. We therefore expect counsel to pay more attention to their arguments in future. The main complaint as we see it is that the appellants are not pleased with the manner the respondent is trying to recover its money. The first problem lies with the respondent targeting Subdivision No. 36 of Farm No. 401a, Lusaka when, according to the appellants, the mortgage had been cleared. The second is that the respondent is again targeting the Remaining Extent of Farm No. 3546, Lusaka before disposing of the movable assets which are the subject of the agricultural charge. We have not seen the agricultural charge but for the purposes of this judgment we do not think that it is relevant nor do we think that admitting the proposed amended affidavit would be necessary because it is quite clear to us that we have sufficient evidence on record for the determination of this appeal. J20 Mortgagees are known to have very wide powers. A mortgagee will not be restrained from exercising his power of sale because the mortgagor has begun a redemption plan, or because the mortgagor objects to the manner in which a sale is being arranged. It should also be remembered that a mortgagee is not a trustee for the mortgagor as regards the exercise of the power of sale. In cases where different properties are mortgaged by different mortgagors to the same mortgagee (such as in this appeal), and a sale of the two properties together is beneficial, both may be sold together and the purchase money apportioned. Where the properties are quite separate, evidence is required that the joint sale will produce a higher price. A mortgagee who holds several distinct mortgages under the same mortgagor which are redeemable by virtue of the equity of redemption arising after default, may, within certain limits, against certain persons who are entitled to redeem all or some of the mortgages, consolidate the mortgages, that is, treat them as one and decline to be redeemed as to any unless he is redeemed as to all. The right of consolidation is equitable and arises only after default on all the securities and the right of consolidation only exists where the mortgages have been made J21 originally by the same mortgagor. What we have summarized in this paragraph addresses the issues raised by the appellant’s with regard to their third ground of appeal. Our summary has been drawn from paragraphs 725 to 764 Volume 32 of Halsbury’s Laws of England, 4th Edition which deal with the rights and liabilities of the mortgagee. We can therefore safely state that since Subdivision No. 36 of Farm No. 401a, Lusaka was availed as a continuing security under the relevant third party mortgage and the facility letters, the respondent has every right to dispose it of to satisfy the debt regardless of the amortization which resulted in a zero balance in the second appellant’s bank statement or the existence of the agricultural charge. Further, the respondent cannot be restrained because the appellants have objected to the manner in which the respondent was disposing of the assets. The argument raised in connection with the fourth ground of appeal is that the learned judge should not have dismissed the application to amend because it had come too late in the day. Having perused the proposed amendments to the affidavit, we have come to the conclusion that even assuming that the amendments J22 had been allowed, they would have been inconsequential as they have not added anything new that would have vitiated the powers of the respondent as mortgagee. The application was made pursuant to Order XVIII r. 1 of the High Rules Cap 27 which provides for general amendments to proceedings when ideally it should have been made under Order V r. 14 of the High Court Rules which deals with amendments and re-swearing of affidavits that are defective or erroneous. There is no merit in the third and fourth grounds of appeal. The net result is that this appeal is dismissed with costs to X the respondent which costs are to be agreed or taxed in default of agreement. E. M. HAMAUNDU SUPREME COURT JUDGE l l l l l l l J I A. M. WOOD SUPREME COURT JUDGE M. MUSONDA SUPREME COURT JUDGE