Zambia National Building Society v Clement Samboko (2023/HPC/0820) [2024] ZMHC 206 (23 February 2024)

IN THE HIGH COURT FOR ZAMBIA AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (Civil J urisdiction) 2023/HPC/0820 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: AN EQUITABLE MORTGAGE OVER SUBDMSION No. A703 OF SUBDIVISION F OF STAND No. 34872, LUSAKA • IN THE MATTER OF: AN APPLICATION FOR AN ORDER OF • FORECLOSURE AND THE CONVEYANCE OF SUBDIVISION No. A703 OF SUBDIVISION F OF STAND No. 34872 TO THE APPLICANT. BETWEEN: ZAMBIA NATIONAL BUILDING SO AND CLEMENT SAMBOKO LlCOF URTOF JUDICIARY 2 3 FEB 2024 COMMERCIAL REGISTRY o~ p · o. Box soo67 t.\.\S~~ • Before Honourable Lady Justice Chilombo Bridget Maka PLICANT For the Applicant: Ms. M. L Nkonde - Messrs Mweshi Banda and Associates. For the Respondent: Mr. A. Tembo - Messrs Tembo, Ngulube and Associates. JUDGMENT Legislation Ref erred to: 1. The High Court Rules, Chapter 27 of the Laws of Zambia. 2. The Rules of the Supreme Court of England 1999 Edition(White Book). 3. The Lands and Deeds Registry Act, Chapter 185 of the Laws of Zambia. Cases Referred to: 1. Magic Carpet Travel and Tours vs. Zambia National Commercial Bank Limited (1999) Z. R, 61. • 2. Lackson Mwabi Mwanza vs. Sangwa Simpasa Chisha and Lawrence Si mpasa (2011) 1 Z. R, 436. 3. Cavmont Bank Limited vs. Cereal Millers anf Farms Limited and Others Appeal No. 277 of 2021. 4. S. Brian Musonda (Receiver of First Merchant Bank Zambia Limited (In Receivership) vs. Hyper Food Products Limited, Tony' s Hypermarket Limited and Creation One Trading Zambia Limited (1999) Z. R, 124 (SC). 5. Kasabi Industries Limited vs. lntermarket Banking Corporation Limited Appeal No. 168 / 2009. 6. Nati onal Drug Company Limited and Zambia Privatisation Agency vs. • Mary Katongo SCZ Appeal No. 79/2001. Ot her Works Referred to: 1 . Fisher and Lightwood's Law of Mortgage 13t h Edition 2. Coote's Treatise on the Law 1of Mortgages, 9th Edition, R ichard Holmes Coote, Volume 1, 1927. 1. Introduction. 1.1. On 24th Novem ber , 2023, the Applicant commenced this action by way of Originating Summon s. Th e Originating J2 • • Summons was supported by an affidavit and skeleton arguments. 1.2. The reliefs being sought by the Applicant are as follows :- i. Payment of all monies due to the applicant under the respective covenants in the mortgage which as at the date hereof stands at K661J606. 12 together with all accruing interest until final payment. ii. An Order that the Respondent absolutely and unequivocally conveys to the Applicant the mortgaged property namely Subdivision No. A 703 of Subdivision F of Stand No. 34872 situate at Lusaka in the Lusaka Province of the Republic of Zambia; and iii. Costs of execution; iv. Any other or further relief that the Court may deem fit. 1.3. The Respondent did not enter appearance, neither did he file an affidavit in opposition and skeleton arguments . 2. Applicant's Affidavit in Support. 2 .1 . The Applicant's affidavit in support of Originating Summons was deposed by Michael Fumbani Nyirenda, a Manager Collections and Recoveries in the Applicant company. 2 .2 . His evidence was that the Applicant and the Respondent executed a Mortgage Deed through which property known J3 as Stand No. 34872/F / A 703, Lusaka(the property) registered in the name of the National Pension Scheme Authority(NAPSA) was demised to the Applicant as security for the repayment of a loan in the sum of K575,000.00 advanced to the Respondent. A copy of the mortgage deed and certificate of title in the name ofNAPSA were produced and marked "MFN l " and "MFN2" respectively. • 2.3. It was averred that the loan advanced to the Respondent • was for purposes of purchasing the property as indicated in a copy of the Mortgage Application Form dated 17th April, 2018 marked ''MFN3". It was therefore agreed that the loan sum would be directly disbursed to NAPSA. A copy of a letter to this effect from the Applicant to the Responded was produced as exhibit "MFN4". 2 .4. It was further deposed that the Respondent was m possession of the property and its conveyance was underway in that the Contract of Sale and Deed of Assignment had been executed by NAPSA and the Respondent, and the Property Transfer Tax Exemption Certain duly obtained by NAPSA. Copies the Contract of Sale, Deed of Assignment and Property Transfer Tax Exemption Certificate were produced and marked "MFN5'>, "MFN6'' and "MFN7'' respectively. 2.5 . That it was a term of the Mortgage Deed that the Respondent would duly and punctually repay the principal J4 with interest at the rate and frequency specified in the schedule to the mortgage and all other monies due as per the Rules and Regulations of the Applicant or under the mortgage. It was also agreed that in the event of default in a month's payment by the Respondent, the whole outstanding balance of the principal and interest thereon would immediately become due and payable. 2 .6. Further agreed was that a certificate of the Applicant's • auditor would constitute prima facie proof of the state of account of the Respondent relating to the mortgage. 2.7. That on 28th June, 2018, the Applicant disbursed the loan • advance to the Respondent. On 5th March, 2019, the Applicant's Manager Collections and Recoveries formally gave notice to the Respondent demanding payment of both t he principal and interest due under the mortgage as evidenced in a copy of a letter produced and marked "MFN8". That by a letter dated 14th August, 2023, another formal demand notice was issued to the Respondent demanding payment of the loan advanced plus interest which had accumulated to a sum of K661 ,606.12. A copy of the second demand letter was produced as exhibit "MFN9" . 2.8. It was further deposed that on 31 st August, 2023, the Respondent, through his Advocates on record, responded to the demand notices in a later of even date wherein the indebtedness was ack:no,vledged with a request to JS restructure the loan facility for a period of eight (8) years. The Applicant, through its Advocates advised the Respondent's Advocates that the request to restructure the loan facility had been declined in a letter dated 20th September, 2023 . The said letters were produced and marked as "MFNl0" and MFNl 1" respectively. 2.9. It was deposed that the state of the account between the parties was as contained in a copy of the Statement of • Account marked "MFN12" 2.10. Mr. Nyirenda deposed that the Applicant had not received the outstanding sum tabulated above or any part thereof or anything of value towards the settlement of the said sum. 3. Applicant's Skeleton Arguments. • 3 .1. The Applicant, through Counsel's arguments firstly cited and quoted Order 30 Rule 14 of the High Court Rules to demonstrate how the Law permits mortgagees to seek the reliefs outlined therein before this Court in Chambers. 3.2. Counsel submitted that the Mortgage Deed exhibited in the affidavit in support proves that the Respondent borrowed a sum of K575,000 .00 and pledged as a security for the repayment of same property known as Stand No. 34872/F / A703, Lusaka. Counsel explained that the Mortgage Deed was yet to be registered at the Lands and Deeds Registry, pending finalization of the conveyance of J6 • • th e property from NAPSA to th e Respondent. That the circumstances make this an equ itable mortgage . 3.3. It was further submitted th at th e Respondent h as only paid a sum of K42,502.01 towards the repayment of th e loan facility, leaving a balance of K66 1, 606. 12. 3 .4. To suppor t the claims endorsed on the Originatin g process, reliance was placed on the case of Magic Carpet Travel & Tours vs. Zambia National Commercial Bank(1) wherein th e Court guid ed on h ow an equitable mortgage is created . That the facts herein are consistent with an equitable mortgage. 3.5. It was submitted th a t th e Applicant's claim for the payment of the outstan d ing su m is backed by Order 30 Rule 14 of the High Court Rules as well as Order 88 Rule l(a) of the Rules of the Supreme Court of England. The Learned authors of Fisher and Lightwood's Law of Mortgage 13th Edition was quoted to posit on the mortgagee's right to claim t h e rep ayment of the debt wh ich righ t accrues the m omen t th e m ortgagor defaults when the payment falls du e. 3.6. It was Counsel's submission that the Respondent h erein failed to make good t he instalmen t payments th ereby entitling the Applicant to claim for the payment of the outstanding balance. 3.7. With regards to the cla im for th e payment of interest, reference was made to clause 3 of tl1e Mortgage Deed J7 • • which stipulates that the Respondent would pay interest on th e loaned sum at the rate of 21 % per a nnum. That the in terest forms part of the debt owed to the Applicant by the Resp ondent. 3.8. Th e Applicant's claim for foreclosure was augmented with the cases of Mwabi Mwanza vs. Sangwa Simpasa and Chisha Lawrence Simpasa(2 ) which was cited in th e case of Cavmont Bank Limited vs. Cereal Millers and Farms Limited and Others(3 ) and S Brian Musonda (Receiver of First Merchant Bank (in Receivership)) vs. Hyper Food Products . Limited and Two Others(4 l wherein the mortgagee's righ t to foreclose and its effect, namely extinguishing th e r igh t of r edemption , were discussed . 3.9. Counsel finally su b m itted on th e claim for the conveyance of the mortgaged prop er ty in an equitable m ortgage. Th e case of Kasabi Industries Limited vs. lntermarket Banking Corporation Limited(5I was relied on to bu ttress the submission that the Applicant herein has the righ t to foreclose and consequently convey the mortgaged proper ty to itself. 3 .10. Counsel prayed th at th e reliefs being sought by the Applicant in this action be granted with costs. 4. Hearing of Application. 4.1. Th e Application was heard on 7 th February, 2 024. J8 4.2. In attendance, were Ms. M. L Nkonde, Counsel for the Applicant and Mr. A. Tembo, Counsel for the Respondent. 4.3. Ms. Nkonde augmented her written submissions with oral submissions, which were essentially a reiteration of the facts of this case as stated in the affidavit evidence and skeleton argument. Same shall therefore not be repeated. 4.4. Ms. Nkonde prayed that there being no defence, the Respondent be Ordered to pay the sum due forthwith • failure to which the Applicant should be allowed to • foreclose the property and convey it to itself. She also prayed that that costs be awarded to the Applicant. 4.5 . In response, Mr. Tembo submitted that the foreclosure proceedings were prematurely commenced by the Applicant because the Respondent has no title in his name. That the Certificate of Title exhibited in the affidavit in support is registered in the name of NAPSA and an equitable mortgage is only created with a deposit of one's title as security for a loan as held in the Magic Carpet and Tours case. 4.6. Mr. Tembo contended that any Order that this Court makes will touch on the rights of NAPSA who are not party to these proceedings. That the foreclosure and conveyance being sought by the Applicant is not practicable due to the legal impediments as the subject property is owned by NAPSA, J9 4.7. Counsel however, admitted and acknowledged the debt owed by the Respondent and sought this Court's indulgence to allow the Respondent liquidate the said debt in 120 days. Mr. Tembo also prayed that this Court orders interest charged to be in accordance with the Judgment Act and not contractual interest as claimed by the Applicant. 4.8 . Mr. Tembo submitted that the Applicant's action should therefore succeed partially as regards the liquidated claim. Counsel prayed that each party bear their respective costs. 4.9 . In reply, Ms. Nkonde submitted that the Mortgage Deed which the Respondent signed clearly stipulates that he would punctually repay the loan advanced plus interest when same fell due. That in the event of default of this obligation the principal sum and interest would become payable. That the action was therefore not premature. 4.10. As regards the practicability of the claim to foreclose and convey, Ms. Nkonde acknowledged that the subject property is still registered in the name of NAPSA but contended that the Respondent has an equitable interest in the said property. That this was more so that steps were taken by NAPSA and the Respondent for the change of ownership. That it is incorrect to state that the Respondent has no interest in the subject property as that would be tantamount to saying the Respondent fraudulently signed the Mortgage Deed. JlO . . • • 4.11 . Ms. Nkonde maintained that foreclosure would be practical as the Respondent has equitable in terest in the eyes of the Law. That this action cannot colla p se merely because the Responden t failed to ob tain title of th e subject property as he agreed to do so once the loan was disbursed to him. 4.12. Ms. Nkon de pr ayed that the foreclosure proceedings be granted should the Respondent fail to settle the outstanding m onies together with contractual interest. She also prayed for costs of this action. 5 . Consideration and Determination. 5. 1. I have considered the originating process and its accompanying documents as well as the respective oral submissions by Counsel for the parties. 5.2. The with in action is anchored on the provisions of Order 30 Rule 14 of the High Court Rules which provides that:- "Any mortgagee or mortgagor, wh ether legal or e quitable, or any person entitled to or having property subject to a legal or equitable charge, or any person having the right to foreclosure or redeem any mortgage, whether legal or equitable, may t ake out as of course an originating summons, returnable in the chambers of a Judge for such relief of the n ature or kind following as may by the summons be specified, and as the c ircu mstances of the case may require; that is to say- i. ii. Payment of moneys secured by the mortgage or c h arge; Sale; Jll iii. Foreclosure; iv. Delivery of possession (whether before o r after foreclosure) to the mortgagee or person entitled to the charge by the mortgagor or person having the property subject to the charge or by any other person in, or alleged to be in possession of the property; v. Redemption; vi. Reconveyance; vii. Delivery of possession by the mortgagee." 5.3. It is common cause that the Respondent was advanced a loan sum of K575 ,000.00 by the Applicant. The loaned sum carried interest at 2 1.6% per annum. As security for the repayment of the said loan, the Respondent deposited with the Applicant a Certificate of Title. 5 .4. However, the said Certificate of Title is in the name of NAPSA. For this reason, Counsel for the Defendant contended that the Applicant's claim for foreclosure and conveyance was impractical. That only the claim for the liquidated sum could b e sustained. 5.5. In essence, the Respondent is disputing the existence of an equitable mortgage. That any Order that this Court may make in respect of the subject property will affect the rights of NAPSA(the registered owners) who are not party to these proceedings. • • J12 • • 5.6. Th e ch aracteristics of an equ itable mortgage were outlin e in th e cited case of Magic Carpet Travel and Tours vs. Zambia National Commercial Bank Limited(1)as follows: "On the last issue of equitable mortgage, the position at common law is that once a borrower has surrendered his title deed to the lender as security for the repayment of the loan, an equitable mortgage is thus created; the borrower, in such a relationship cannot deal with the land without the knowledge and approval of the lender whose interest in the land takes prece ence ... d " 5 .7. The foregoing position was equa lly stated by the Learned auth ors of Coote's Treatise on the Law of Mortgages, 9 t h Edition at page 168 as follows:- "A deposit of title deeds by the owner of freehold or leaseholds with a creditor for the purpose of securing e ither a debt antecedently due or a sum of money advanced at the time of the deposit operates as an equitable mortgage or charge, by virtue of which the depositee acquires, not merely the right of holding the deed until the debt is paid, but also an equitable interest in the land itself.'' 5.8. The a bove authorities all sp eak to the n atu re of equitable mortgages, namely that th e own er of th e title surrenders same to a creditor for purp oses of securing th e repayment J13 • • of a loan. Section 2 of the Lands and Deeds Registry Act defines a mortgage as fallows: "mortgage" includes a deposit of title deeds or documents with the object of creating an equitable mortgage on the property comprised in such deeds or documents and any charge." 5.9. The evidence on record indicates that the Respondent was advanced the loaned sum for purposes of purchasing the subject property. On record are copies of the Contract of Sale a.11.d Deed of Assignment between NAPSA and the Respondent, all executed sometime in 2023. These confirm the Applicant's position that steps had been taken to transfer ownership of the subject property to the Respondent. The change of ownership was however not actualized. 5.10. However, it is imperative to point out that the evidence on record indicates th at the Respondent applied for the loaned sum sometime in April, 2018 which was approved by the Applicant through an offer dated 21 st May, 2018 as shown in exhibit "MFN4". Also noteworthy is that the Account Statement marked "MFN12" shows that the Respondent's account was debited the sum of ZMW497,956.13 on 2 nd December, 2019. 5. 11. The foregoing tim eline therefore demonstrates that at the time the loaned sum was being advanced to the Respondent, the Respondent did not have an equitable J14 • • interest in the property as same was legally owned by NAPSA. The Contract of Sale that creates an equitable interest had not been executed yet. Therefore, even if the Certificate of Title had been deposited with the Applicant at the time the loan agreement was entered into, the Respondent lacked the capacity to form an equitable mortgage. 5 .1 2. I am therefore of the considered view that an equitable mortgage was not created between the Applicant and the Respondent at the time the loaned sum was disbursed to the Respondent because the facts and sequence thereof do not meet the criteria set out in the authorities cited above. 5 .13. The Respondent's equitable interest in the property only arose sometime in 2023 when the contract of sale between NAPSA and the Respondent was executed. 5 .14. The foregoing notwithstanding, the Respondent defaulted in his obligation to repay the loaned sum plus interest. This is a fact that has been admitted by Counsel for the Respondent. 5 .15. Ms. Nkonde prayed that the Respondent be ordered to settle the outstanding sum and interest forthwith while Counsel for the Respondent attempted to sneak in application to allow the Respondent liquidate same in 120 days , minus the contractual interest. Mr. Tembo prayed that the interest provided for in the Judgments Act be applied instead. JlS • • 5 .16. In th e case of National Drug Company Limited and Zambia Privatisation Agency vs. Mary Katongo(6 ) the Supreme Cou rt held th at:- "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 Court is to give efficacy to t he contract wh en one party has breached it by respecting, upholding and enforcing th e contract." 5.17 . Guided by the foregoing holding, I find that the Respondent cannot escape his obligation to pay the contractual interest. Further, the Respondent defaulted in his obligations, which fact was admitted. Consequently, the Applicant's first claim is upheld. 5 . 18. Despite the Respondent depositing a Certificate of Title, same is n ot in the Respondent's name and on account of t h e loan agreement being entered into prior to the Respondent having an equitable interest in the property, no equitable mortgage was created in line with the cited authorities. As such, this Court is precluded from ordering the conveyance of the prop erty by the Respondent to the Applicant. 6. Conclusion. 6 .1. Th e Applican t has p r oved that it disbursed the loaned s1.1m to the Respondent and the default in repaying same by the J16 Respon de11t. The Applicant is therefore entitled to the payment of the money th at was obtained by the Respondent together with the contractual interest thereon. 6.2. I therefore enter Judgment in favou r of the Applicant against the Respondent for the payment of the outstanding sum of K661,606.12 together with contractual interest accruing thereon. 6.3. The Respondent is hereby ordered to pay the above Judgment sum together with Contractual interest within 60 days from the date of the J u dgment. 6.4. The Applicant's claim for an Order that the Respondent absolutely and unequivocally conveys to the Applicant the property is h ereby dismissed for being premature and want of Title by the Respondent. 6.5. I award costs of this action to the Applicant to be taxed in default of Agreement. Delivered at Lusaka this 23 rd day of February, 2024 . . ............... - . -~ ........ . Chilombo Bridget Maka HIGH COURT JUDGE • • J17