Stanbic Bank Zambia Limited v Phil Auto Enterprises Limited (2023/HPC/0670) [2024] ZMHC 204 (14 October 2024)

J IN THE HIGH COURT FOR ZAMBIA AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) 2023/HPC/0670 IN THE MATTER OF: AN APPLICATION UNDER ORDER 30 RULE 14 OF THE HIGH COURT RULES, r'u'ir.~~::"":"~~C~H~A~PT:! ER 27 OF THE LAWS OF ZAMBIA AND IN THE MATTER HIGH COURT OF Zfi MBIA JUDICIARY COMfvlERCIAL DIVISION C:-7 F: ~ 2024T* REGISTRY 'PHIR (tl4, PROPERTY COMPRISED IN A PARTY FIRST FURTHER P. O. BOX 50067. Luse RGE RELATING TO STAND No. LUSAKA/LN_25166/ 17, IN THE LUSAKA PROVINCE OF THE REPUBLIC OF ZAMBIA. BETWEEN: STANBIC BANK ZAMBIA LIMITED APPLICANT AND PHIL AUTO ENTERPRISES LIMITED 1 ST RESPONDENT ZITA MAMBWE MUSONDA 2 ND RESPONDENT AMON CHIKUWA 3RD RESPONDENT Before Honourable Lady Justice Chilombo Bridget Maka. For the Applicant: Mr. F. Muzimu - Messrs. Corpus Legal Practitioners. For the Respondents: Ms. M. Msimuko - Messrs. Celine Nair & Company. RULING Rl Legislation Referred to: 1. The High Court Rules, Chapter 27 of the Laws of Zambia. 2. The Rules of the Supreme Court of England (White Book) 1999 Edition. Cases Referred to: 1. Bimzi Limited vs. B & C Commodities and Shipping Limited SCZ/8/177/98 2. Nyampala Safaris Zambia Limited and Others vs. Zambia Wildlife Authority and Others(2004) Z. R, 49 (SC) 3. Phiri vs. Tembo (HPC 574 of 2010 (2011) ZMHC, (31) 4. Development Bank of Zambia vs. Aid Plant and Fleet Management Limited (2016/HPC/0543) 5 . Carmine Safaris Zambia Limited and Another vs. Zambia National Tender Board and 6 Others SCZ Appeal No. 145/2003 6. Luanshya Copper Mines vs. First Rand and Other Creditors of Luanshya Copper Mines PLC and 2 Others SCZ/8/168/2009 7. Zambia Revenue Authority vs. Post Newspapers Limited Appeal No. 36 of 2016 8. Business Partners International SME Fund Zambia Limited vs. Kennedy Matashi T / A Kennedy Matashi Trading and Another 2018/HPC/091 . 9. Alios Finance Zambia Limited vs. Enigma Petroleum Limited, Link Pharmacy, Court Yard Hotel Limited2014/HP/1497. 10. Sarah Sakachoma vs. 15 MCC Africa Construction and Trade Limited CAZ Appeal No. 74/2019. Other Works Referred to: 1. Halsbury's Laws of England Volume 17 R2 1. Introduction . 1.1. This Ruling addresses the Respondents' applications to set aside the Writ of FiFa on the grounds of irregularity and to stay its execution. 1.2. The applications were initiated by summons, supported by affidavit and skeleton arguments, filed on 7 th August 2024. They were brought under Order 3 Rule 2 of the High Court Rules and Order 4 7 Rule 1 (8) of the Rules of the Supreme Court of England {White Book) , 1999 Edition. 1.3. The Applicant opposed the applications, filing its affidavit in opposition along with skeleton arguments on 2 n d September 2024. 2. Background. 2.1. On 23rd September 2023, the Applicant commenced a mortgage action against the Respondents by Originating Summons, supported by affidavit evidence and skeleton arguments. The Applicant sought the following reliefs:- i. Payment of all monies in the sum of ZMW13,552,795.61 outstanding as at 4 th September, 2023, or any such other sum found to be due, secured by a third party first further charge date d 25th August, 2023, which is due and owing to the Applicant, having been advanced to the 1st Respondent under a Term Loan Facility R3 between the Applicant and the 1st Respondent dated 9 t h December, 2022; ii. An Order that the 1st Respondent pays to the Applicant the contractually agreed interest at the rate of 19% as per clause 5.1.1 of the Term Loan Facility; iii. An Order for the enforcement of the Personal Guarantees of the 2 n d and 3 rd Respondent; iv. Delivery up of vacant possession of the mortgaged property by the 1st Respondent to the Applicant; v . An Order of foreclosure and sale of the mortgaged property; vi. Costs; and vii. Any other relief that the Court may deem necessary. 2 .2 . On 29th January 2024 , the Court directed the Resp ondents to file their opposition, if any, by 6 th February 2024. The Applicant was to file a reply, if necessary, by 9 th February 2024. 2 .3. Th e m atter came up for hearing on 12th February 2024. The Applicant relied on the docu ment s it had filed , while the Respondents raised no opposition to the action. 2.4. J u dgment was delivered on 23rd February 2024, awarding the Applicant, among other r eliefs, the sum of ZMW13 ,522,795 .61. The 1st Respondent was Ordered to R4 settle the Judgment sum within 60 days, failing which the Applicant was authorized to foreclose and sell the mortgaged property. The enforcem ent of the 2 nd and 3rd Respondents' personal guarantees was also Ordered. 2.5. To enforce the Judgment, the App licant filed a praecipe for writ of possession and the corresponding writ of possession on 9 th May 2024. On 28th June 2024, the Applicant further filed a praecipe for a writ of fieri facias (Fifa) and obtained the writ of Fifa, which is now being challenged on grounds of irregularity. Subsequently, the Court granted the Respondents an ex-parte Order staying the execution of the writ of Fifa, pending the determination of their application to set it aside. 3. The Respondents' Case. 3.1. The core of the affidavit evidence supporting this application is that fore closure and sale of the mortgaged property are the primary remedies in a mortgage action. Th erefore, the Applicant's issuance of the writ of Fifa is irregular and should be set aside. Furthermore, that since the application to set aside the writ is still pending, it is necessary to stay the execution of the writ in the interim. 3.2. In their legal submissions, the Respondents first invoked Order III, Rule 2 of the High Court Rules to highlight the Court's power to issue any Orders necessary to achieve justice. RS 3.3. The Respondents also relied on the cases of Bimzi Limited vs. B & C Commodities and Shipping Limitedl1l and Nyampala Safaris Zambia Limited and Others vs. Zambia Wildlife Authority and Others12l to support their request for a stay of execution. They argued that they had demonstrated strong grounds for the stay and that it should be granted in the interest of justice. They emphasized that if execution is not stayed, the seized goods may be sold before the Court determines the application to set aside the writ of FiFa. 3.4. Regarding the setting aside of the writ of Fifa, the Respondents referred to Order 47 Rule 1(8) of the White Book which grants the Court the authority to set aside a writ of Fifa on the basis of irregularity. They also cited Order 2 Rule 2 of the White Book which provides for the setting aside of any irregular proceeding, step, document, Judgment, or order. 3.5. It was submitted that the writ of Fifa issued by the Applicant is irregular because it is not an appropriate mechanism for enforcing a mortgage action and is inconsistent with the judgment of this Court. 3.6. The Respondents further referred to the High Court cases of Phiri vs. Tembol3l and Development Bank of Zambia vs. Aid Plant and Fleet Management Limited141 to argue that, under Order 30, Rule 14 of the High Court Rules, R6 the primary method of debt ~ecovery in mortgage actions is the sale of the mortgaged property. 3. 7. In light of these submissions, the Respondents urged the Court to exercise its discretion to stay the execution of the writ of Fifa and set it aside. 4. The Applicant's Case. 4.1. The essence of the Applicant's affidavit evidence is that, in its Judgment of 23rd February 2024, this Court ordered the enforcement of the 2 nd and 3 rd Respondents' Personal Guarantees dated 10th June 2022. Therefore, that the writ of Fifa was issued to enforce those guarantees, and it was correctly employed. The Applicant argued that a writ of Fifa can lawfully be issued against a guarantor in a mortgage action. 4.2 . The Applicant further contended that the Respondents did not meet the conditions required to justify a stay of execution. It was also deposed that the Applicant had the financial ability to reimburse any potential loss the Respondents might incur if the writ of Fifa were executed and later set aside. 4.3. In its legal arguments, the Applicant framed two k ey issues for determination. On the first issue- whether there are special circumstances justifying the stay of execution-the Applicant cited the case of Carmine Safaris Zambia Limited and Another vs. Zambia National Tender Board R7 and 6 Others151 to argue that no such circumstances exist in this case. 4.4. The Applicant also referred to Order 59/13/2 of the White Book, emphasizing that courts should not deny a successful party the fruits of litigation except where irreparable loss is likely to result. It asserted that a stay of execution should only be granted where the Applicant demonstrates that such loss would occur. 4.5. The Applicant submitted that the Respondents' sole reason for seeking a stay of execution-being the issuance of a writ of Fifa instead of foreclosure-was insufficient to warrant the stay. 4.6. The Applicant explained that, after issuing the writ of possession, it became evident that the sale of the mortgaged property would not cover the full debt. As a result, it became necessary to enforce the 2 n d and 3 rd Respondents' personal guarantees as ordered in the Judgment. 4.7. On what constitutes good grounds for a stay of execution, the Applicant cited the cases of Luanshya Copper Mines vs. First Rand and Other Creditors of Luanshya Copper Mines PLC and 2 Others161 and Zambia Revenue Authority vs. Post Newspapers Limitedl71 . The Applicant submitted that sufficient grounds are only shown where there is no reasonable prospect of recovering the money if the stay is not granted. R8 4.8. On the second issue-whether the writ of Fifa was irregularly issued-the Applicant referred to paragraph 6.4 of this Court's Judgment (page JlS) , which expressly ordered the enforcement of the 2nd and 3 r d Respondents' personal guarantees. 4.9. It was argued that the writ of FiFa was properly issued to levy execution on the 2nd and 3rd Respondents as guarantors. This submission was supported by reference to the High Court case of Business Partners International SME Fund Zambia Limited vs. Kennedy Matashi T /A Kennedy Matashi Trading and Another181 where the court allowed execution against a guarantor when the sale of the mortgaged property failed to fully satisfy the debt. 4.10. The Applicant reiterated that the mortgaged property had been assessed prior to the issuance of the writ of possession and found insufficient to cover the debt, necessitating the enforcement of the personal guarantees through the writ of Fifa. 4.11. Responding to the Respondents' argument that the writ of FiFa was inappropriate for a mortgage action, the Applicant clarified that the writ of FiFa was not the primary enforcement tool. It first issued a writ of possess10n on 9 th May 2024 to exercise its foreclosure rights. R9 4.12. The Applicant further contended that the Respondents' claim that the writ of Fifa was inconsistent with the Judgment was vague and unfounded. It maintained that the Judgment, at page J15 , Ordered the enforcement of the personal guarantees, thereby granting the Applicant the right to enforce the money Judgment through any lawful means, including a writ of FiFa. The Applicant cited the case of Alios Finance Zambia Limited vs. Enigma Petroleum Limited, Link Pharmacy, Court Yard Hotel Limited191 to emphasize tha t nothing in law prevents it from choosing an appropriate mode of execution to enforce personal guarantees . 4 .13.ln conclusion, the Applicant prayed that the Respondents' applications to stay execution and set aside the writ of Fifa be dismissed with costs. 5. Hearing. 5 . 1. At the hearing of the composite applications, both parties wer e represented by their respective legal Counsel. 5.2. On behalf of the Respondents, Ms. Msimuko indicated tha t she was relying entirely on the affidavit and skeleton arguments submitted in support of the application. 5.3. Similarly, Mr. Muzimu, r epresenting the Applicant, r elied on the affidavit in opposition along with the accompanying skeleton arguments. 5. 4. Ther e was nothing in r eply. RlO 6. Consideration and Determination. 6.1. I have carefully considered the Respondents' two applications, along with the evidence and submissions from both parties. 6.2. The first application, to set aside the writ of FiFa for irregularity, is grounded on Order 47 Rule 1(8) of the White Book, which provides under the heading "setting aside execution" as follows:- "This may be done where execution has been improperly issued, even after execution has been levied." 6.3. This Court is therefore empowered to set aside a writ of Fifa if it is found to have been improperly issued. While the rule does not explicitly define what constitutes an improper issuance, guidance can be drawn from Halsbury's Laws of England, Vol. 17, page 274, which states:- "An execution is wrongful where the endorsement on a writ directs the sheriff to levy at a wrong address or on the goods of a person other than the execution debtor." 6.4. The Respondents' application to set aside the writ of Fifa is based on the argument that it was irregularly issued. They contend that this matter was a mortgage action, and enforcement should be through foreclosure and sale of the mortgaged property, not by way of a writ of Fifa. Rll 6.5. The Applicant, however, maintains that there is no irregularity in the issuance of the writ of Fifa. It argues that the writ of Fifa was issued to enforce the personal guarantees of the 2 nd and 3 rd Respondents as Ordered in the Judgment of 23rd February 2024, owing to the insufficiency of the mortgaged property's value to satisfy the Judgment debt. 6.6. As noted earlier, the Judgment was entered in favour of the Applicant, Ordering the 1st Respondent to pay the sum ofZMW13,522,795.61 within 60 days. It also directed the enforcement of the 2 nd and 3 rd Respondents' personal guarantees. Furthermore, in the event of default, the mortgaged property was to be foreclosed and sold. 6.7. It is evident that the 1st Respondent failed to settle the judgment sum within the prescribed 60 days, prompting the Applicant to initiate foreclosure by issuing a writ of possession on 9 th May 2024. The Applicant has confirmed that it has taken vacant possession of the mortgaged property. 6.8. However, the Applicant has not yet sold the mortgaged property, asserting that the property's value would be insufficient to liquidate the Judgment debt. This assertion, however, has not been supported by any valuation report or other evidence. 6.9. Despite this, the Applicant argues that it became necessary to enforce the personal guarantees of the 2 nd R12 and 3 rd Respondents to recover the outstanding debt, in accordance with this Court's Judgment. 6.10. While it is correct that the Judgment Ordered the enforcement of the personal guarantees, I observe from the praecipe for the writ of Fifa that the addresses listed are for all three Respondents-1 st, 2 nd , and 3rd . The writ further directs the Sheriff to levy execution on all the Respondents, which contradicts the Applicant's assertion that the writ of Fifa was aimed solely at enforcing the personal guarantees of the 2 nd and 3 rd Respondents. 6 . 11. Guided by Halsbury's Laws of England cited above , I find that including the 1st Respondent in the writ of Fifa renders it irregular. This conclusion is further supported by the decision in the case of Sarah Sakachoma vs. 15 MCC Africa Construction and Trade Limited1101 where the Court of Appeal upheld the setting aside of a writ of FiFa for having been issued against the wrong party. 6.12. While the Applicant is entitled to enforce the personal guarantees of the 2 nd and 3 rd Respondents, it cannot do so against the 1st Respondent using the writ of Fifa. As against the 1st Respondent, enforcement should proceed through the foreclosure and sale of the mortgaged property-a process that has already been initiated by the Applicant and through the enforcement of the 2 nd and 3 rd Respondents' p ersonal guarantees. R13 6.13. Accordingly, I find that the writ of Fifa dated 28th June 2024 must be set aside, although not for the reasons advanced by the Respondents. The Applicant's assertion that the mortgaged property would be insufficient to satisfy the debt remains unsupported by evidence and cannot be sustained. 6.14. As for the application to stay execution, having found that the writ of Fifa is irregular and must be set aside, it follows that the execution thereof must also be stayed. 7. Conclusion. 7 .1. The Respondents' application succeeds to the extent outlined above. While the Applicant was within its rights to enforce the personal guarantees of the 2 n d and 3 rd Respondents through the writ of Fifa, this option does not extend to the 1st Respondent. The inclusion of the 1st Respondent in the writ of Fifa renders it irregular. 7.2. Consequently, the writ of Fifa dated 28th June 2024 1s hereby set aside for irregularity. 7.3. The Ex-Parte Order staying execution of the writ of Fifa, dated 13th August 2024, is hereby confirmed. 7.4. Each party shall bear their own costs. 7.5. Leave to appeal is hereby granted. Delivered at Lusaka this 14th day of October, 2024 ................. ~ : ........... . Chilombo Bridget Maka HIGH COURT JUDGE R14