Lorgat and 1 other v NBS Bank Limited and 2 others (Land Cause 39 of 2013) [2015] MWHC 519 (26 March 2015)

HC/PR Land 39 /13 Soche East CW1/3 JUDICIARY IN THE HIGH COURT OF MALAWI PRINCIPAL REGISTRY LAND CAUSE No. 39 OF 2013 IN THE MATTER OF TITLE NUMBER SOCHE EAST CW1/3 and IN THE MATTER OF ss 60(1), 96(1)(a) AND 139(1)(2) OF THE REGISTERED LAND ACT Between: | ZEBUNNISA LORGAT | 1 PLAINTIFF (as trustee of the LORGAT TRUST) and | FAIZAL LORGAT 2"? PLAINTIFF (on his own behalf and on behalf of the all the beneficialies of the LORGAT TRUST) and NBS BANK LIMITED | 1 DEFENDANT and AFRICA LIFE SCIENCES LTD 2" DEFENDANT and | ISMAIL I. LORGAT | 3" DEFENDANT RULING nyaKaunda Kamanga, J. The 1‘ plaintiff and 3" defendant claim to be the two trustees of the Lorgat Trust and the registered proprietors of property known as Title Number Soche East CW1/3, hereinafter the property. The 2" plaintiff together with others is supposed to be a beneficiary under the said trust. In September 2013 the plaintiffs commenced a civil action against the defendants by way of originating summons contending that the 3" defendant, as Chargor, without knowledge and consent of the 1" plaintiff created a surety charge in respect of the property in favour of the 1 defendant. The surety charge was for the purpose of securing 1 HC/PR Land 39 /13 Soche East CW1/3 the repayment to the 1°‘ defendant (the Chargee) of financial facilities advanced to the 2" defendant by the 1“ defendant. On 15 August 2014 the loan obtained by the 2™ defendant stood at K244,006, 130.38. The plaintiffs came to know of the said surety charge after the 1“ defendant instructed an agent to place an advertisement in a daily newspaper on 3 September 2013 calling for tenders for sale of the property after the 3 defendant had defaulted on its obligations. On 6 September 2013 the plaintiffs obtained an order of interlocutory injunction restraining the 1“ defendant from proceeding with the sale of the property. The 1° plaintiff asserts that being a joint proprietor of the property, a surety charge could not have been lawfully created in respect of the property without the knowledge and concurrence of the 1“ plaintiff. The plaintitts seek an order of the court rectifying the land register by cancelling the 1*‘ defendant’s surety charge on the property for being invalid and for having so registered by mistake or fraud, the said mistake and fraud having been caused or substantially contributed to by the 1° defendant through its act, neglect and or deceit. The plaintiffs seek against the defendants the following reliefs: i. An order setting aside the surety charge registered by the 1° defendant in respect of title number Soche East CW/1/3 on 7” January, 2011 as Application Number 43/2011. ii. A declaration that the 3“ defendant could not create a charge in respect of the property in favour of the defendant without the consent and knowledge of the 1“ plaintiff, the other Trustee of Lorgat Trust, a joint proprietor of the property, in view of the provisions of sections 60(1) and 96(1)(a) of the Registered Land Act. iii. A declaration that the charge created by the 3" defendant in favour of the 1“ defendant in respect of the property is invalid and a nullity for contravening both sections 60(1) and 96((1)(a) of the Registered Land Act. iv. A declaration that the 1° defendant did not act in good faith and with due diligence when it proceeded to register ja surety charge in respect of the property without first ascertaining whether the 1” plaintiff as joint proprietor thereof had knowledge and/or consented to the creation of the said surety charge. v. An order rectifying the land register by concealing the 1“ defendant’s surety charge for being invalid and for having been so registered by mistake or fraud, the said mistake and fraud having been caused or substantially contributed to by the 1° defendant through its act, neglect and or default. vi. Costs of this action. The plaintiffs have outlined the issues which this court should determine to be as follows: 2 HC/PR Land 39/13 | 3 Soche East CW1/3 1. Whether or not the 3" defendant could create a surety charge in respect of the property in favour of the 1° defendant without consent and / or knowledge of the 1“ plaintiff, the other trustee of the Lorgat Trust, being a joint proprietor of the property, in view of the provisions of sections 60(1) and 96((1)(a) of the Registered Land Act. 2. Whether or not a surety charge created in contravention of both sections 60(1) and 96((1)(a) of the Registered Land Act is a valid charge. 3. Whether or not the 1“ defendant acted in good faith and with due diligence when it proceeded to register a surety charge in respect of the property without first ascertaining whether the first plaintiff as joint proprietor thereof had knowledge and / or consented to the creation of the said surety charge. | 4. Whether or not in the circumstances of this case the first defendant’s surety charge in respect of the property is subject to the unregistered interests of the 1“ and 2" plaintiffs, the 1‘' defendant having had notice of the said interests before the creation of the surety charge. 5. Whether or not the High Court should order a rectification of the land register by cancelling the 1° defendant’s surety charge the same having been registered by either mistake or fraud and whether or not the said mistake or fraud was caused by the 1° defendant or was substantially contributed to by it through its acts, neglect and or default. This court finds that if it were to determine the plaintiffs’ originating summons under ss 60(1) and 96(1) of the Registered Land Act then this would be proceeding on the presumption that the 1“ plaintiff and the 3" defendant own the property in issue as The Trustees of the Lorgat Trust. The existence of a valid is being strongly contested by the 1° defendant. The 1° defendant has filed three affidavits strongly opposing the action on the ground that the plaintiffs have no case on merit against the 1“ defendant to warrant the grant of the reliefs sought. The 1* defendant contends that Lorgat Trust was not properly registered and actions of the 3 defendant should be binding. The 1“ defendant contends that the plaintiff has not brought evidence to suggest that the 1” defendant knew that the 3" defendant was not proprietor of the property. The 1 defendant asserts that the issue that it is a bona fide proprietor of a charge without notice of the plaintiffs’ interests over the property is not in contention. The 1“ defendant contends that the Registered Land Act provides a remedy to a person suffering damage by an irregular exercise of power of sale. The 3 defendant contends that there are irregularities in the surety charge alleging that he was not party to the loan transaction and that the charge contravened provisions of the Registered Land Act. The plaintiffs, the 1 ~ defendant and the 3” defendant all make allegations of fraud and misrepresentation on the part of each other in creating the surety charge in issue. HC/PR Land 39 /13 Soche East CW1/3 os This court finds that there are several issues raised by the parties that Lee een, refg red to above, as well as those of the surety charge as a contract “and the®thifd party action, that require determination but would not be c * ~” apprdbridtely dealt by way of affidavit evidence under the present originating summons procedure: Kamlete v Attorney General.' It is therefore ordered that “thé action proceeds as if it had been began by writ of summons and that the plaintiffs should file and serve its statement of claim on the defendants within 14 days hereof. Costs occasioned by this hearing will be determined at trial. | | Pronounced in chambers this 26" day of March 2015 at Chichiri, Blantyre. Oy. Dorothy nyaKaunda Kamanga JUDGE | | Case information: Date of hearing 17, February 2015 Date of ruling 26 March 2015 Mr. Baza Counsel the plaintitis Mrs. Mulele Counsel the 1* (Defendant Mr. Chilenga Counsel the 2" Defendant Mr. A. 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