First National Bank of Lesotho LTD V Manthoane Tlaba (C of A (CIV) 06/2025) [2025] LSCA 5 (2 May 2025)

LESOTHO IN THE COURT OF APPEAL OF LESOTHO HELD AT MASERU C OF A (CIV) NO. 06/2025 CCT/0085/2023ND In the matter between: FIRST NATIONAL BANK OF LESOTHO LIMITED APPELLANT AND MANTHOANE L TLABA RESPONDENT CORAM: P. T DAMASEB AJA M. H CHINHENGO AJA P. MUSONDA AJA HEARD: 17 APRIL 2025 DELIVERED: 2 MAY 2025 FLYNOTE Summary judgment – Appealability – Interlocutory order – Financial Consumer Protection Act 2022 – Counterclaim – Procedural fairness – Leave to appeal – Summary dismissal – Costs. The appellant bank advanced a personal loan to the respondent under a written agreement requiring monthly repayments. Upon the respondent’s default following a reduction in income, the bank instituted proceedings and applied for summary judgment. The respondent opposed and counterclaimed, citing a contractual clause and s 41 of the Financial Consumer Protection Act 2022, seeking loan restructuring. The High Court (Mokhoro J) dismissed the summary judgment application and upheld the counterclaim. The appellant appealed without first obtaining leave. Held, dismissing the appeal: An order dismissing summary judgment is interlocutory and not appealable as of right under s 16 of the Court of Appeal Act 1978. No leave having been sought or granted, the appeal was incompetent and fell to be struck off. The court a quo misdirected itself by adjudicating the respondent’s counterclaim in the course of summary judgment proceedings, thereby precluding the appellant from exercising procedural rights. The respondent properly conceded the error. Held further, striking off the appeal but setting aside the order granting the counterclaim, with no order as to costs, having regard to the divided success. JUDGMENT P. T. DAMASEB AJA Introduction [1] This is an appeal against the decision of the court a quo (Mokhoro J) dismissing the appellant’s application (as plaintiff) for summary judgment and granting a counterclaim by the respondent who was the defendant a quo. Context and background [2] In January 2019, the First National Bank of Lesotho Limited (the appellant) advanced a loan of M219 679.68 to Manthoane L. Tlaba (the respondent) under a personal loan facility agreement. The loan was to be repaid in 48 monthly installments of M4576.66, with an interest rate of 25.50% per annum. The monthly instalments were scheduled to begin on 25 January 2019. [3] The respondent complied with the terms of the loan agreement and made regular payments until 31 March 2023. However, after this date, the respondent failed to make the agreed monthly payments, breaching the terms of the loan agreement. In addition to the unpaid loan instalments, the respondent's transaction account became overdrawn, resulting in a negative balance of M4 896.86. Consequently, the entire outstanding loan amount, including interest, became due and payable. [4] During September 2023, the appellant instituted legal proceedings against the respondent, claiming repayment of the full outstanding loan amount of M114 162.23, the overdrawn transactional balance of M4576.66, interest at the prime lending rate, and costs of suit. The respondent filed a notice of appearance to defend and a plea, which included a counterclaim requesting the court to order the appellant to restructure his loan to align with his current earning capacity in terms of a clause in the loan agreement. [5] The appellant subsequently applied for summary judgment and asserted that the respondent had no bona fide defence to the claim and had entered an appearance to defend merely to delay proceedings. The respondent opposed the application for summary judgment pleading that his inability to pay the full monthly instalment was due to his reduced income. The Court a quo [6] The court a quo found that the deterioration of the respondent’s financial position due to reduced income was a valid defence under Clause 9 of the loan agreement and s 41 of the Financial Consumer Protection Act 20221 (the Act). The court also upheld the respondent’s counterclaim (which alleged that the appellant should restructure the respondent’s loan to accord with his current earning capacity), finding that the appellant’s refusal to restructure the respondent’s loan agreement contravened s 21 of the Act which states: (1) Enforcement proceedings over a credit liability shall commence after a consumer has been: a. Notified of a default and ‘ b. Informed of his rights. (2) A financial service provider shall be required to issue a written notice explaining an amount overdue and how a default can be remedied by a consumer. 1 Section 41 reads: ‘A financial service provider shall: a) Establish Mechanisms and process to identify its consumer who may be undergoing financial difficulty and b) Act promptly and efficiently to address a situation with a consumer’. (3) A financial service provider shall observe a minimum notice period between a pre-enforcement notice commencement of action, commensurate with a type, length and amount of credit as outlined by the Regulator.’ [7] The learned judge a quo dismissed the appellant’s summary judgment application and held that the respondent’s financial deterioration constituted a bona fide defence under Clause 9 of the loan agreement and s 41 of the Act. The learned judge also held that the appellant should never have approached the court without first having complied with the provisions of s 41 and 21 of the Act. [8] Dissatisfied with the court a quo’s judgment and order, the appellant launched this appeal, challenging the court’s recognition of financial deterioration as a bona fide defence, its consideration of Section 21 of the Financial Consumer Protection Act, and its decision to adjudicate the counterclaim during summary judgment proceedings. Grounds of appeal [9] The appellant raised the following grounds of appeal: a. That the court erred in holding that a "change in financial position of the respondent" constitutes a bona fide defence for purposes of summary judgment. b. The court erred and misdirected itself by adjudicating considering s 21 of the Financial Consumer Protection Act 2022, despite the issue not being raised by either party or by the court during the proceedings. c. The court erred in considering the respondent’s counterclaim in the course of determining the summary judgment application. Concession [10] Counsel for the respondent conceded that the court a quo misdirected itself in adjudicating the counterclaim and that the appeal should succeed in respect of order number 2 in the executive part of the court a quo’s judgment. Issues for determination [11] The first question that arises in this appeal is whether the order of the court a quo was appealable as of right, and whether the court a quo misdirected itself in considering the counterclaim alongside the application for summary judgment. Is the order appealable? [12] An application for summary judgment is interlocutory in nature as it does not finally dispose of the substance of the dispute between the parties. Although the respondent had not raised it, during oral argument the Court raised the issue whether an order dismissing summary judgment was appealable as of right. The appellant did not seek and was never granted leave to appeal either by the High Court or this Court. [13] The right of appeal in civil cases is governed by s 16 of the Court of Appeal Act 1978, which reads: (1) An appeal shall lie to the Court— (a) from all final judgments of the High Court; (b) by leave of the Court from an interlocutory order, an order made ex parte or an order as to costs only. (2) The rights of appeal given by subsection (1) shall apply only to judgments given in the exercise of the original jurisdiction of the High Court.’ (My underlining for emphasis). [14] An appeal as of right lies only against a judgment of the High Court that is final in effect and disposes of the substantive rights of the parties. An interlocutory order may only be appealed with leave being granted either by the High Court or by this Court in the event that the High Court refuses to grant leave. [15] In Mpalalane and Another v Phori2 this Court made clear that where the High Court refuses to grant summary judgment, that is an interlocutory order requiring leave to appeal. In Kgatle v Metcash Trading Ltd3 and other authorities4 it was held that ‘as a general rule, an order refusing a summary judgment is not appealable for the reason that it is an interlocutory order that does not have the effect of a final order.’ [16] The appellant seeks to appeal against the order of the court a quo dismissing an application for summary judgment. It is clear 2 LAC (2000-2004). 3 Kgatle v Metcash Trading Ltd 2004 (6) SA 410 (T) at 416C. 4 See Jim v Active Power (A121/2018) [2019] ZAMPMHC 17 (21 June 2019); Nkosi v Sanlam Indie (4925/2023) [2024] ZAMPMHC 45 (20 August 2024); Candice v Road Accident Fund (34591/2020) [2025] ZAGPJHC 175 (25 March 2025). that such an order is not appealable as of right and may only be appealed to this Court with leave. [17] In terms of s 16 of the Act, to appeal against an interlocutory order, the appellant requires leave to appeal. It is common cause that the appellant did not seek leave to appeal and therefore the appeal is incompetent and must be struck off. The counterclaim [18] The only remaining issue is whether the court a quo erred in considering the counterclaim when determining the summary judgment application. I have already stated that the respondent concedes that the court a quo misdirected itself to adjudicate and determine the counterclaim when the appellant had not yet exhausted fully its procedural right to have the application for summary judgment determined. [19] The concession was properly made. Disposition [20] It is clear that this appeal should not have served before this court in the first place as the order is clearly not appealable. It is also clear that Order 2 granting the counterclaim was incompetently granted, and stands to be set aside. Costs [21] This brings us to the issue of costs. It was common ground that since the parties have achieved success and failure in equal measure, the appropriate order to be granted is that there be no order as to costs. In the circumstances, the appropriate course is to make no order as to costs. Order 1. The appeal is struck off the roll. 2. Order 2 (in the executive part of the High Court’s Order) granting the respondent’s counterclaim is set aside. 3. There is no order as to costs. –––––––––––––––––––––––––––––––––––––– P. T DAMASEB ACTING JUSTICE OF APPEAL ____________________________________ P MUSONDA ACTING JUSTICE OF APPEAL I agree I agree _______________________________________ M. H CHINHENGO AJA ACTING JUSTICE OF APPEAL FOR APPELLANTS: ADV K. J KELEPA FOR RESPONDENT: ADV L. MOLAPO 9