African Banking Corporation Zambia Limited T/A Atlas Mara v Levy Mwanawasa and Company (APPEAL NO. 007 /2023) [2024] ZMCA 277 (30 October 2024)

IN THE COURT OF APPEAL OF ZAMBIA HOLDEN AT LUSAKA (Civil jurisdiction) APPEAL NO. 007 /2023 BETWEEN: AFRICAN BANKING COR:P..aRA ZAMBIA (T / A ATL·Q~,M11.a.1.~~, N APPELLANT 1/ 'i' ' ~) LEVY MWANAWA~~ ... A_ND - . RESPONDENT Coram: Chashi, Makungu and Sichinga, JJA On the 1 Sth day of September and the 30th day of October, 2024 For the Appellant: Mr. J. Tembo of Messrs August Hill & Associates with Miss For the Respondent: Mrs. J. M. Kunda, SC of George Kunda and Co T. Banda In - House Counsel for the Bank JUDGMENT Makungu, JA delivered the Judgment of the Court. Case referred to: 1. Kuta Chambers (sued as a firm) v. Concillia Sibulo (suing as administratrix of the Estate of the late Francis Sibulo)- SCZ Judgment No . 75/ 2015 2. Zambia Extract Oils and Colourants Limited and Another v. Zambia State Insurance Pension Trust Fund Board of Trustees - SCZ Selected Judgment No. 31 of2016 3. Musa Ahmed Adam Yousuf v. Mahtani Group of Companies & Others 2011 / HPC/ 0081 Legislation referred to: 1. The Legal Practitioners Rules, Statutory Instrument No. 51 of 2002. 2 . The Legal Practitioners Act, Chapter 30 of the Laws of Zambia. 3. The Legal Practitioners' (Costs) Order, Statutory Instrument No. 9 of 2001. 4. The Legal Practitioners' (Conveyancing and Non-Contentious Matters) (Costs) Order, Statutory Instrument No. 8 of 2001 1.0 INTRODUCTION 1.1 This appeal is against the dismissal of a preliminary objection as to the legality of Cause Number 2012/HPC/1044 between the respondent, then plaintiff and the appellant as defendant in a ruling dated 30th September 2022. The ruling was made by Mr. Justice C. Kafunda of the High Court. 2.0 BACKGROUND 2.1 On 30th November 2011, the respondent and Finance Bank Zambia Limited entered into an agreement whereby the respondent company would collect debts on behalf of Finance Bank Limited from its debtors. It was an express term of the agreement that Finance Bank Zambia Limited would pay the respondent a ten percent (10%) fee as remuneration for the actual monies recovered . J2 2.2 The discrepancy between the names of the contracting bank and the appellant bank is because African Banking Corporation Zambia (T / A Atlas Mara) the appellant herein amalgamated with Finance Bank Zambia Limited and acquired its rights and liabilities. 2.3 After the appointment as debt collector, the respondent proceeded to commence an action under cause number 2012/HPC 0675, between Finance Bank Zambia Limited v. Betrich Investments Limited, Betty Chizyuka and Richard Chizyuka to recover the debt owed to Finance Bank Zambia Limited. 2.4 The respondent obtained a court judgment dated 21st July 2014, in favour of the bank for USD 809,891.16 together with interest, and in default of payment, liberty to foreclose , take possession of Stand No. 896 Lusaka and dispose of the same by way of sale. 2 .5 Later, the respondent commenced Cause Number 2021/HPC/0486 against the appellant by way of a writ of summons accompanied by a statement of claim seeking the following reliefs: (i) Immediate payment of the sum of USD 80,989.16 being the sum owed to the plaintiff by the defendant J3 for professional services rendered in the civil case under number 2012/ HPC/ 0675 between Finance Bank Zambia Limited and Betrich Investment Limited, Betty Chizyuka and Richard Chizyuka in the courts of law, and value added tax (VAT) and disbursements of USD 5, 000.00 as per engagement letter and fee note issued therein. (ii) Interest. (iii) Damages for breach of agreement and loss of income. (iv) Costs for and incidental to these proceedings. (v) Any other relief the Court may deem.fit. 3.0 PRELIMINARY APPLICATION IN THE COURT BELOW 3.1 On 12th October 2021, the appellant filed a notice to raise a preliminary issue for the disposal of the case on a point of law before the lower court. The issue raised was "whether the plaintiff's claim as set out in the writ of summons and statement of claim for payment of the sum of USD 80, 989.16 is illegal as the aforesaid sum is claimed in respect of professional services rendered by the plaintiff to the defendant under an agreement with a remuneration structure which is or ought to be considered as a contingency fee arrangement, which is strictly prohibited by rule 8 of the Legal Practitioners Rules of 2002." J4 4.0 AFFIDAVIT IN SUPPORT OF PRELIMINARY APPLICATION 4.1 The application was supported by an affidavit sworn by the appellant's legal Counsel, Milan Dipakkumar Desai who averred that the respondent, and Finance Bank Zambia Limited entered into an agreement under which the respondent was to collect debts on behalf of the Bank at an agreed fee of only 10% of the actual monies recovered. This was contained in a letter dated 30th November, 2011 from Finance Bank to the respondent. 4.2 Mr. Desai, further stated that the remuneration arrangement as stipulated in the aforementioned letter amounts to a contingency fee agreement which is proscribed by the rules governing the mode and manner in which legal practitioners are to be remunerated or compensated for services rendered. 5.0 AFFIDAVIT IN OPPOSITION TO PRELIMINARY APPLICATION 5.1 The affidavit in opposition was deposed to by Maureen Kakubo Mwanawasa who confirmed that the parties entered into the agreement evidenced by the letter dated 30th November 2011. She further averred that the respondent managed to secure a judgment in favour of Finance Bank JS Limited in Cause Number 20 12/HPC/0672 but the appellant gave the judgment to another law firm to execute. 6.0 AFFIDAVIT IN REPLY 6.1 In reply, the appellant in an affidavit deposed to by Milan Dipakkumar Desai, reiterated that the 10% remuneration fee amounted to a contingency fee arrangement as it was d ependent on the successful recovery of the debt by the plaintiff. Further, Cause Number 2012/HPC/0675, was a contentious matter. 7.0 DECISION OF THE LOWER COURT 7 . 1 After considering the preliminary application, the lower court found that there was no express agreement by the parties with regard to the means of collection of the debts. That by not providing for the same in the letter of appointment, the appellant envisaged that, as is normally the case with debt collection assignments, the means of collection would encompass both contentious and non-contentious business. 7.2 Consequently, the Court found that the exception under the Legal Practitioners (Conveyancing and Non-Contentious J6 Matters) (Costs) Order 2001 was applicable, meaning that the matter was non-contentious. 7.3 In light of the above, it was held that the respondent's claim as set out in the statement of claim is not illegal and the preliminary application was dismissed. 8.0 GROUNDS OF APPEAL 8.1 Before this Court, the appellant has advanced three grounds of appeal, framed as follows: 1. The Court below erred in law and fact when it held that the remuneration agreement between tht;? appellant and respondent was not illegal. 2. Alternatively, the Court erred in law and fact when it held that the remuneration agreement between the appellant and respondent was not a contingency fee arrangement or agreement. 3. The Court erred in law and/act when it held that the litigation action commenced by the respondent in the matter of Finance Bank Zambia Limited v. Betrich Investments Limited, Betty Chizyuka and Richard Chizyuka under Cause No. 20 l 2/HPC/06 75 in respect of the recovery of the debt owed to Finance Bank Zambia Limited fell within the ambit of non contentious business. J7 9.0 APPELLANT'S HEADS OF ARGUMENT 9.1 In the heads of argument dated 9 th January 2023, counsel for the appellant argued grounds one and two together whilst ground 3 was argued separately. 9.2 On grounds one and two, counsel submitted that the remuneration structure as set out between the appellant and respondent, amounted to a contingency fee arrangement which is proscribed by Rule 8 of the Legal Practitioners Practice Rules, 2002 .1 He also referred to the definition of contingency fees under the same rules. The said Rule only provides for an arrangement for payment of a contingency fee in a case where the legal practitioner is conducting a matter 1n another jurisdiction that permits contingency fee agreements. 9.3 Citing the case of Kuta Chambers (sued as a firm) v. Concillia Sibulo (suing as administratrix of the Estate of the late Francis Sibulo), 1 counsel argued that an arrangement by a legal practitioner to be paid contingency fees for work carried out within this jurisdiction is prohibited. 9.4 He further relied on the case of Zambia Extract Oils and Colourants Limited and Another v. Zambia State Insurance Pension Trust Fund Board of Trustees2 in J8 support of the submission that a contract that is contrary to the law is not enforceable. Hence , the claim as set out by the respondent in the Court below is illegal as it relates to an arrangement which is proscribed by t h e law. 9 .5 In support of ground three , counsel submitted that the Legal Practitioners Act2 makes a distinction between works that are considered as contentious and non-contentious. Section 2 of the Legal Practitioners Act2 defines the terms contentious and non-contentious as follows: "Contentious business includes any business done by a practitioner in any court and non contentious business means any business in which a practitioner is employed other than contentious business." 9.6 Based on this provision, counsel emphasized that any work carried out by a legal practitioner in respect of a suit before any court is contentious. He argued that the debt collection action instituted by the respondent under Cause No. 20 12/ HPC / 0675 was contentious. 9.7 We were referred to The Legal Practitioners' (Costs) Order,3 2001 and The Legal Practitioners' (Conveyancing and J9 Non-Contentious Matters) (Costs) Order, 2001)4 which were applicable at the time of appointing the respondent as debt collectors. The appellant's counsel noted that The Legal Practitioners' (Conveyancing and Non-Contentious Matters) (Costs) Order, 2001,4 under the heading "Commission chargeable on Collection of Debts," states that the remuneration scale for litigious debt collections only applies where there was an express agreement after the commencement of litigation proceedings. 9.8 Counsel argued that in this case, the letter appointing the respondent as debt collector was executed before any litigation began, and there was no subsequent agreement. Citing the case of Musa Ahmed Adam Yousuf v. Mahtani Group of Companies & Others,3 counsel submitted that while a legal practitioner and their client may enter into a remuneration agreement outside the limit prescribed by statute, this must be done within the ambits of the law. 9.9 Finally, counsel submitted that the lower court erred m ruling that the debt recovery in this matter fell under non contentious business. JlO 10.0 RESPONDENT'S HEADS OF ARGUMENT 10.1 The respondent's heads of argument were expunged from the record by the Court during the hearing of th e appeal as they were filed out of time on 30th August 2024, without leave of the Court. 11.0 ANALYSIS AND DETERMINATION OF THE APPEAL 11. 1 We have carefully considered the record of appeal and the arguments advanced by counsel for the appellant. We shall deal with the first two grounds of appeal together as t h ey are related. The third ground will be tackled separately. 11 . 2 The first and second grounds of appeal challenge the holding of the lower Court that the remuneration agreement between the parties was legal and did not constitute a contingency fee arrangement. 11.3 Section 2 of the Legal Practitioners Practice Rules 1 defines "contingency fee" as follows: "Contingency fee' means any sum, whether ftxed or calculated either as a percentage of the proceed or otherwise howsoever, payable only in the event of success in the Jl 1 prosecution or defence of any action, suit or other contentious proceedings." 11.4 Rule 8 of the same rules proscribes the application of contingency fees in this jurisdiction as follows: 8 ( 1) "Subject to sub-rule (2) a practitioner who is retained or employed to prosecute or def end any action, suit or other contentious proceedings shall not enter into any arrangement to receive a contingency fee in respect of that proceeding. (2) Paragraph 1 of this rule shall not apply to an arrangement in respect of an action, suit, or other contentious proceeding in any country other than Zambia to the extent that a local lawyer in that country would be permitted to receive a contingency fee in respect of that proceeding." 11. 5 In 2 015 , th e Supreme Court in the case of Kuta Chambers (sued as a firm) v. Concillia Sibulo (suing as administratrix of the Estate of the late Francis Sibulo), 1 discussed contingency fees , noting that they were "long J1 2 barred in this j urisdiction" due to their tendency to "facilitate corrupt and unethical practices in legal proceedings." 11.6 Rule 8 (1) and (2) of the Legal Practitioners Practice Rules1 and th e Kuta Chambers case supra, make it unequivocally clear that, 1n this jurisdiction, any arrangement for contingency fees is prohibited unless t h e legal practitioner is handling a matter in another jurisdiction where such arrangements are allowed. 11. 7 To determine whether the agreement between the parties amounted to a contingency fee arrangement, we refer to the appointment letter dated 30th November 201 1, from the appellant to the respondent found on pages 40 to 41 of the record of appeal. This letter shows that the respondent was engaged by the appellant to collect debts on behalf of Finance Bank Zambia (before the bank was amalgamated with African Banking Corporation Zambia (T / A) Atlas Mara) . The remuneration structure is detailed in paragraph (b) of the letter, as follows: "Finance Bank shall only pay the firm ten percent (10%) of the actual monies recovered. All other costs and expenses whatsoever incurred by the firm in the J13 recovery of the debts shall be borne exclusively by yourselves. Where no recovery is made then you shall not be entitled to any payment." 11.8 It is clear that the respondent's payment was contingent on the successful recovery of debts. There was no express agreement between the parties as to the means to be employed in collecting the debts. This in our view entails that the parties envisaged the collection of debts using both contentious and non-contentious business. 11. 9 Applying Rule 8( 1) of the Legal Practitioners' Practice Rules,1 it means that if the debt was collected through non contentious business, the 10% fee would be permissible because Sub rule 1 talks specifically about contentious proceedings in general and not non-contentious matters. 11.10 However, since the debt was ultimately recovered through litigation, which is contentious business, the arrangement between the parties hereto amounted to an illegal contingency fee prohibited under Rule 8(1) of the said rules . 11.11 In light of the prohibition on contingency fees for contentious proceedings under the Legal Practitioners Practice Rules, as well as the Supreme Court's strong stance against such J14 arrangements , in the Kuta Chambers case supra, we find m erit in grounds 1 and 2 of the appeal. 11.12 In the third ground of appeal, counsel for the appellant alleged that the lower Court erred in law and fact when it held that the litigation commenced by t h e respondent in the case of Finance Bank Zambia Limited v. Betrich Investments Limited, Betty Chizyuka and Richard Chizyuka under Cause No. 20 12/HPC/0675 in respect of the r ecovery of the debt owed to Finance Bank Zambia Limited fell within the ambit of non-contentious business. 11.13 Section 2 of the Legal Practitioners Act ,2 defines the terms contentious and non-contentious business as follows: "Contentious business" includes any business done by a practitioner in any court; "Non-contentious business" means any business in which a practitioner is employed other than contentious business." 11.14 The Legal Practitioners' (Conveyancing and Non contentious matters) (costs) order4 under the heading JlS "Commission Chargeable on Collection of Debts" states that: "This part s h all not apply to a debt recovered after commencement of litigation touching the debt, unless there is agreement to apply this scale, aft er commencement of such litiga t ion." 11.15 The import of this provision as correctly pu t by counsel for the appellant, is that the remuneration scale as provided under the Legal practitioners' (Conveyancing and Non c ont entious matters) (costs) Order4 for debt collection will only apply to litigious debt collection where there has been an express agreement after the commencement of the court proceedings. 11.16 In interpreting this provision, the learned High Court Judge reasoned that the said exception applies to this case. That the agreement of the parties herein with regard to remuneration was to apply where the debt collection was non-contentious as well as where debts were collected after litigation. 11.17 While debt collection can encompass both contentious and non-contentious business, the provisions of the law are clear J16 about when the exception to the general rule can be applied. In this case, there was no express agreement for remuneration after the commencement of the court proceedings to recover the debt; the agreement in issue was made before that. 11.18 We accept the submissions made by the appellant's counsel that for these provisions to apply to this case, there ought to have been a subsequent agreement between the parties on remuneration following the commencement of litigation. To hold that the debt recovery after the litigation process under cause No. 2012/HPC/0675 was non-contentious or that it fell within the exception to the rule in the absence of a subsequent express agreement allowing the same, is legally untenable and therefore the lower Court's finding to that effect is hereby set aside. We are fortified by the case of Zambia Extract Oils and Colourants Limited and Another v. Zambia State Insurance Pension Trust Fund Board of Trustees2 where it was held that the Court will not enforce a contract that is expressly or impliedly prohibited by statute. 11. 19 Based on the foregoing, we are of the firm view that the lower Court misdirected itself in holding that the action commenced under the said Cause No. 20 12/HPC/0675, was J17 within the ambit of the law and thus legal. Under the circumstances, the preliminary objection ought to have been sustained. Therefore, the 3 rct ground of appeal also has merit. 12.0 CONCLUSION 12.1 All in all, the appeal succeeds and the ruling of the lower Court dated 30 th September 2022, is hereby set aside. Cause Number 2012/HPC/0675 is dismissed with costs to the appellant here and in the court below to be borne by the respondent. The same to be taxed i efault of agreement. J. CHASHI COURT OF APPEAL JUDGE C. K. MAKUN U ..... .,. . . .._ . ....... . 'A, SC COURT OF APPEAL JUDGE COURT OF APPEA JUDGE J18