Zambia National Commercial Bank & Another v Banda (HP 423 of 2015) [2020] ZMHC 93 (30 September 2020)

IN THE HIGH COURT FOR ZAMBIA 20 15/HPC/0423 AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: 0 SEP 2020 COMMERCIAL REGISTRY X 50067 ZAMBIA NATIONAL COMMERCIAL BANK 1ST APPLICANT JAMES BANDA AND 2ND APPLICANT RACHEL MUDIYO BANDA RESPONDENT Before Hon. Madam Justice Mrs. Irene Zeko Mbewe For the 1st Applicant: Mrs. A. Mwalula, Legal Counsel ZANACO For the 2nd Applicant: Mr. K. Wishimanga of Messrs AM Wood & Company For the Respondent: Mr. L. Yeta of Messrs Central Chambers JUDGMENT Cases referred to: 1. Khalid Mohammed v Attorney-General [1982] ZR 49 2. C1hainama Hotels Limited and Others v Investrust Merchant Bank Limited [2017] ZMSC 16 3. Credit Africa Bank Limited (In Liquidation) v John Dingani Mudenda [2003] ZR 71 4. Colgate Palmolive (Z) Inc v Shemu and Others Appeal No 11 of 2005 ii I P a g e Legislation and other works referred to: 1. High Court Rules, Cap 27 of the laws of Zambia 2. Halsbwy 's Laws of England, 4' Edition, Volume 32 The Applicant commenced legal proceedings by way of originating summons against the 1St Respondent claiming for the following reliefs: 1. Payment of all monies and contractually agreed interest due and owing to the Applicant under a credit facility letter dated 31St My 2010 for new short term loan for ZMK500 million (unrebased) which facility was secured by legal mortgage over Plot 103/400 Chifundo Road Chawama in the name of the Respondent and which money stands at K 1,244,645.28 as at 31St August 2015. 2. An order for foreclosure on the mortgaged property 3. Delivery of vacant possession of the mortgaged property by the Respondent to the Applicant 4. An order for sale of the mortgaged property by the Applicant 5. Any other relief the Court shall deem fit 6. Costs. Following an application for joinder, the 2'' Applicant was joined to the proceedings. On 13' May 2019 a Consent Judgment was entered into between the ist 9 Applicant and the Respondent wherein the 15t and 2nd Applicant consented that the 2nd 2nd Applicant is the legal owner of Stand 103/400 Chifundo Road, Chawama Lusaka and neither the 15t Applicant nor the Respondent shall have any claim whatsoever to the subject property. Bearing that in mind, it follows that the relief of foreclosure, possession and sale of the mortgaged property is no longer available to the 1' Applicant. I shall therefore J2 I P a g e only limit the evidence to the issue as to whether the Respondent is indebted to the 1St Applicant in the claimed sum. From the pleadings, the facts leading to this action may be summarized as follows: On the 31S May 2010, the Respondent was availed a short-term loan for ZM1K500 million (Exhibit "GMK1"). It was an agreed term of the facility that the Respondent would pay interest at the lS Applicant's fluctuating base rate plus 10% of 20% meaning the interest was 30% per annum on the daily overdrawn balances and payable monthly by debit to her account. It was further agreed that any interest outstanding remaining unsettled after expiry of the contractual period within which the parties agreed to be compounded at the prevailing bank base rate plus a margin of 10% and unauthorized facility margin of 6%. The security for the facility was a legal mortgage created over Plot No 103/400 Chifundo Road Chawama Lusaka (Exhibit "GMK2"). According to the I" Applicant, despite the facility having expired on the 31St May 2012, the Respondent failed to settled her indebtedness by the agreed dates despite reminders to the Respondent (Exhibit 11GMK411). In a letter dated 3rd June 2014, the Respondent permitted the 1St Applicant to sell the mortgaged property but she neglected to conclude the transaction (Exhibit "GMK5"). The Respondent resisted the I It Applicant's claim on the basis that she gave the I s' Applicant vacant possession of the subject property in question in June 2011 and the Pt Applicant was notified of this and confirmed receipt of the notice. That all receipts and outgoings from the point of vacant possession including rental collections and outgoings were for the 15t Applicant to administer. J3 I P a g e The Respondent made an application for leave to file further affidavit in opposition to the originating summons which was granted but most of the averments are now redundant following the Consent Judgment of 13th May 2018. Of relevance to the 1 st Applicant's claim is that in respect to the K6680.00 collected as rentals and the K51,000.00 deposited by the alleged purchaser, it was the Respondent's belief that the same was never deposited into her account because the Applicant acted fraudulently and exhibited what she termed the reconstructed statement of account (Exhibit "RMB3"). Further, that in coming up with what she allegedly owed, the Applicant never took into account the difference between the alleged purchase price and the market price of the mortgaged property leading to the Ft Applicant owing the Respondent a balance. According to the Respondent, the 1st Applicant did not fail to collect rentals as the market demand for the property was high as shown by the waiting list (Exhibit "Rr4B 1"). The Respondent further stated that from the reconstructed bank statement it showed the 1St Applicant had collected a total of K600,666.00.00 from both the dwelling quarters and the commercial properties inclusive. According to the Respondent once she gave the [St Applicant vacant possession, interest should have ceased. It is her belief that the 11 Applicant was under a duty to exercise utmost good faith at all times and failed to obtain a reasonable best price to her detriment. In the affidavit in rejoinder, the 1 It Applicant denied the Respondent's assertion and maintained that the sum of K6680.00 and K51000.00 were deposited into the Respondent's account out of which a cheque for K1882.17 to Lusaka City Council for consent to assign the property and property rates was issued and K51,000.00 issued to Zambia Revenue Authority for property transfer tax (Exhibit "GMK 10"). J4 I P a g e It was the 1st Applicant's position that it did not collect rentals as the tenants neglected to pay the same. On 5th November 2013 the 1 Applicant engaging B A Property Consultants in an attempt to collect rent and the said agent only managed to collect K6680.00 from the tenants (Exhibit "GM1K7-811). According to the deponent, the Respondent was advised by the 1St Applicant it would recover any unrecovered balance (Exhibit "GMK9"). The l Applicant denied receipt of the sum of K372,750.00 as alleged by the Respondent who was advised that interest would continue to accrue on the facility. Applicant's evidence Having allowed the cross examination of the deponents, the Pt Applicant called George Mubanga Kashoki as the sole witness who relied on his affidavits filed into Court. Under cross examination, he admitted the subject property was handed over to the Applicant on Yd June 2011 but was not in a position to confirm the occupancy levels at the material time. He maintained it was difficult to collect rent nor was it the responsibility of the Applicant to go round collecting rentals in cash from the tenants. He told the Court the 15t Applicant engaged B A Consultants to collect rentals on its behalf. The witness testified that the 1St Applicant would have been in a position to collect rent if directed by a Court Order. He stated that the bank statements related to when a Court Order directed the Applicant to collect rentals whilst the other statement was after the directive to collect rentals was made (Exhibit "GM 13"). He maintained that no improvements had been made to the subject property after the valuation was done. When queried as to what cheques and payments were made by the 15t Applicant relating to the subject property, the witness confirmed a cheque for J5 I P a g e state consent and ground rent having been issued to the Council but only ground rate was paid for. He confirmed a cheque of K51,000.00 was issued and payable to Zambia Revenue Authority and clarified that issuing a cheque did not involve the payee but the customer giving instructions. In re-examination, the witness clarified that the purchase price paid by the 2nd Applicant did not appear in the loan statement account as it was paid towards statutory obligations and did not go towards reducing the Respondent's indebtedness. He explained that the [St Applicant had opened a current account in the Respondent's name where disbursements were made from (Exhibit "GMK1 0"). Respondent's evidence The Respondent gave evidence and relied on her opposing affidavits filed into Court. She also called 3 witnesses. Under cross-examination, she admitted she borrowed a sum of K500,000.00 from the 1St Applicant and agreed to the terms of the facility letter with an interest rate of 30% per annum on the loan. She conceded that the repayment period was 2 years and agreed she was not detained at the time she executed the facility letter. She admitted that the 1St Applicant could visit the subject property every quarter. In further cross-examination, the Respondent told Court that the 1st Applicant had communicated that she had defaulted and had 21 days to liquidate the loan failing of which a repossession would be done. In respect to the tenants, she told the Court that at the time of handover of the subject property to the Pt Applicant, there was full occupancy and the Pt Applicant advised her they would sell the subject property. J6 I P a g e Under further cross examination, she testified that the I' Applicant collected rentals of ZMW322,750.00 from June 2011 to October 2015 and had witnesses to confirm the payment of rentals to the Applicant and that BA Consultants also collected rentals as she had sight of the receipts they issued. When queried as to whether the 1St Applicant collected a total of K556,250.00 her response was that she was not in position to confirm that position. Relating to the schedule of rent payments, the Respondent maintained her evidence was in the form of bank statements including the testimony of witnesses who told her of the rentals they paid to the 15t Applicant. DW2 was George Sichaiwe who testified that from 2000 to 2011 he was an occupant at the subject property and at the material time employed by the Respondent. His duties were to manage the property and collect rentals at the end of the month where he would record the payments into a rent book which book was not produced as evidence into Court. DW2 stated he surrendered all documents relating to rent payments to Mr Kashoki. He admitted he was not privy to the loan agreement between the l' Applicant and Respondent. He maintained that the 1St Applicant's agents would collect rent and personally witnessed the collection of rent from a Mrs Banda. Other than that, he never witnessed any person been receipted for payment of rentals. DW3 was Monica Mwale who testified she was a tenant at the subject property between 2000 to 2011 paying K650.00 monthly and had no tenancy agreement before Court. She testified that the 1St Applicant's employee Mr Kashoki came to inform her he would be collecting rent. She started paying her rentals to officials from the 1s' Applicant who never signed anywhere to acknowledge receipt of the said rentals. When shown a schedule from B. A Consultants, she confirmed her name J7 I P a g e was not on it. She explained her name appeared as Mwanida Mwale of shop 3 instead of shop 1 and explained she was known as Monica Mwale. In re-examination, she maintained the Applicant never gave them receipts after collecting rentals. She confirmed her name Monica Mwale appeared as a tenant (Exhibit "RMB 23"). DW4 was Chansa Kabwe a tenant at the subject property from 2011 to 2013 and occupied house number 20 at a rental of K200.00 per month. She testified that she never signed a tenancy agreement with the Respondent. She told the Court that when the 1st Applicant's collected rental she would pay cash to the 1st Applicant's officials even though no receipts were ever issued and despite requests the officials never obliged. She could not recall how many times she paid rentals to B. A Consultant. In re-examination, DW4 maintained that receipts for rentals were never issued by the 1St Applicant. Both parties filed written submissions which I have considered in the determination of this matter and shall make reference to when necessary. Analysis I have considered the affidavit evidence, viva voce evidence, documentary evidence and the written submissions of the respective parties. It is indisputable that on 31 May 2010, the Respondent was availed a loan facility by the 1st Applicant to the tune of ZIvIK500,000,000.00 (unrebased) and the interest rate was 30% per annum. As security for the loan, the Respondent charged property known as Plot No. 103/400, Chifundo Road, Chawama Lusaka. Upon default of repayments, the Respondent surrendered the mortgaged property to the 1 St Applicant and the same was sold to the 2" Applicant. J8 I P a g e In respect to the 2' Applicant, by way of Consent Judgment dated 13 th May 2019, the 1St and 2' Applicant consented that the 2' Applicant is the legal owner of Stand No 103/400 Chifundo Road, Chawama Lusaka and neither the 1St Applicant nor the Respondent shall have any claim whatsoever to the subject property. It is the lS Applicant's contention that as at 31s' August 2015 the Respondent's outstanding debt is ZMW 1,244,645.78. The Respondent on the other hand argues that the I st Applicant recovered the debt through collection of rentals from June 2011 to December 2015. The 1st Applicant's claim is predicated on Order 30 Rule 14 of the High Court Rules, Cap 27 of the laws of Zambia which provides as follows: "Any mortgagee or mortgagor, whether legal or equitable, 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 take out as of course an originating summons, returnable in the chambers of a Judge for such relief of the nature or kind following as may by the summons be specified, and as the circumstances of the case may require; that is to say- Payment of moneys secured by the mortgage or charge, Sale; Foreclosure; Delivery ofpossession (whether before or 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; J9 I P a g e Redemption; Reconveyance; Delivery ofpossession by the mortgagee." The parties having executed a Consent Judgment on 1 3th May 2019, the subject property and the reliefs of possession, foreclosure and the power of sale are no longer available to the 1st Applicant. The only issue for determination is whether the Pt Applicant's is entitled to payment of all monies and contractually agreed interest which money stands at ZMW1 ,244, 645.78 as at August 2015. As highlighted above, it is not in dispute that the Respondent defaulted. The Respondent testified she opted to surrender and transfer the mortgaged property to the lS Applicant on 3 d June 2011 following her default in repayments. It is trite that he who asserts must prove as explained in paragraph 19 of the Haisbury 's Laws of England, Volume 19, that: "To succeed in any issue the party bearing the legal burden ofproof must: (1) satisfy a judge or jury of the likelihood of the truth of his case by adducing a greater weight of evidence, than his opponent, and (2) adduce evidence sufficient to satisfy them to the required standard or degree ofproof.. In civil cases, the standard ofproof is satisfied on a balance ofprobabilities." This principle was also echoed by the Supreme Court in the case of Khalid Mohammed v Attorney General (1982) ZR 49 The Respondent's main contention is that the 1S Applicant collected rentals from the property amounting to the sum of ZMW556, 250.00 from June 2011 to December 2015 which is denied by the 1St Applicant. ilO I P a g On the issue of rentals, DW2's testified that he was informed the 11 Applicant's agents were collecting rentals from the Respondent's tenants although at trial he stated he did witness the said agents collect rentals from tenants. In this respect, DW2' evidence at best was scanty and did not assist the Respondent. DW3 claimed to have paid rentals to B. A Consultants, She led no evidence to show that she paid rentals to the Pt Applicant's agents. In contrast, the evidence from the 1St Applicant's witness is that B. A Consultants collected rentals from a Ms. Mwanida Mwale for the month of January 2014 who was owing rentals for December 2013 and February 2014. However, DW3 refuted this as she claimed she had vacated the premises. DW3 proved to be an elusive and unreliable witness and this is evident from her demeanour in Court and in particular and rather oddly first gave her name as Monica Mwale whilst in cross examination she stated her name was Mwanida Mwale and later in re-examination restated that she was known as Monica Mwale. DW4 also told the Court she paid rentals to the 1st Applicant's agents from 2011 to 2013 out of which a total of ZMW320.00 was paid to B. A Consultants despite the report marked as "GMK8" showing a payment of ZMW3 10.00. She further stated that a receipt was issued but failed to produce the same in Court. The Respondent only produced a list of tenants and amounts paid but the same did not show that indeed the money was paid to the 1St Applicant or collected by its agents. I do not find the Respondent's witnesses credible. In the present case, I am of the considered view that the Respondent has not discharged the burden of proving that a total sum ofZMW556, 250.00 was recovered by the Is' Applicant through collection of rentals. I am inclined to accept the 1 Al I P a g e Applicant's evidence that only a sum of ZMW6,680.00 was collected by B. A. Consultants as shown in exhibit "GMK8". I note that following execution of the contract of sale with the Respondent, the 2' Applicant paid ZMW5 10, 000.00 as purchase price for the property. The explanation proferred by Mr Kashoki is that this amount is not contained in the statement of account as it was used to pay statutory obligations and did not go towards the reduction of the debt. However, the 1St Applicant has not led any evidence to substantiate this assertion. The learned authors of Haisbury 's Laws of England, Fourth Edition, Volume 32, paragraph 785, have set out that if a mortgagee realizes part of the debt on the covenant for payment or by sale of the mortgaged property he must account or give credit for the amount realized in the foreclosure action. This principle was applied by the Supreme Court in the case of Chainama Hotels Limited and Others v Investrust Merchant Bank Limited [2017] ZMSC 16 (2) where the Court observed in a mortgage action that after the sale, the Appellant was required to go a step further and render an account. It follows that the 1st Applicant should have accounted for the money realized from the sale of the mortgaged property showing a balance reflecting either what is still owing to the Pt Applicant or what is due to the Respondent as surplus, if any. The Respondent alleges the 1" Applicant was charging interest illegally. In respect to compound interest, the Supreme Court in the case of Credit Africa Bank Limited (In Liquidation) v John Dingani Mudenda (2003) ZR 710, stated that: "The charging of compound interest can only be sustained if there is express agreement between the parties to the charging of compound interest or ifthere is evidence of consent or acquiescence to the same." J12 I P a g e In terms of interest and the type of interest applied to the credit facility, clause 2.1 is instructive and states that: "Interest on outstanding remaining unsettle after expiry of approved facility (after expiration of contractual period within which to pay the facility as agreed by the parties herein) shall be compounded at the prevailing Bank Base Rate plus a margin of 10% and unauthorized facility margin of 6% (currently 20% plus 10% plus 6%=36%) per annum and payable monthly in arrears by debit to the account. This interest shall also be payable both before and after judgment untilfull settlement." Clause 2.1 of the facility letter clearly indicates that compound interest was incorporated in the agreement between the Pt Applicant and the Respondent and states that interest shall be paid both before and after judgment until full settlement. I am of the view that the I st Applicant's continued charging of interest was within the confines of the facility and not illegal. At the time of execution of the facility letter, the Respondent was contractually competent and capable of signing a binding contract thus she ought to have known the terms thereof. In Colgate Palmolive (Z) Inc v Shemu and Others Appeal No. 11 of 2005 (unreported)("-, the Supreme Court guided that: "If there is one thing more than another which public policy requires it is that men offull age and competent understanding shall have the utmost liberty in contracting and that their contract when entered into freely and voluntarily shall be enforced by Courts ofjustice." The 15t Respondent has not claimed coercion or undue pressure at the time of entering into the facility agreement with the 15t Applicant therefore the said term was willingly accepted by the Respondent. J13 I P a g e After a careful analysis of the 1St Applicant's claim and from the evidence on record. I find that the Respondent has not fully paid the amount hence the lS Applicant is entitled to payment of all monies owed and agreed interest. However, as earlier alluded, the 1St Applicant's statement of account does not reflect the sum of ZMW5 10,000.00 being the purchase price of the mortgaged property paid by the 2" Applicant. Disposal 1. Judgment is entered in favour of the 15t Applicant against the Respondent for monies and interest owed which as at 31 August 2015 stood at ZMW1,244,645.78 less the payments made. The Judgment sum shall attract interest at the short-term deposit rate from date of the originating process to date of Judgment as determined by Bank of Zambia and thereafter at the commercial lending rate until full payment. 2. I further Order that the 1st Applicant prepares an updated statement of account which shall indicate all payments made by the Respondent towards the reduction of the debt. Following preparation of the said statement of account, the 11t Applicant and Respondent shall appear before the Registrar for determination of the outstanding amount payable to the Ist Applicant. 3. I award costs to the 1S Applicant to be taxed in default of agreement. Leave to appeal is granted. Delivered this 30th day of September 2020. IRENE ZEKO BEWE HIGH COURT JUDGE J14 I P a g e