Baxter Sichone and Anor v Scooner Investments Ltd (Appeal 112 of 2016) [2019] ZMSC 290 (11 June 2019)

IN THE SUPREME COURT OF ZAMBIA HOLDEN AT NDOLA/LUSAKA/KABWE (Civil Jurisdiction! Appeal No. 112/2016 SCZ/8/55/2016 1st APPELLANT 2nd APPELLANT AND SCOONER INVESTMENTS LIMITED RESPONDENT Coram: Mambilima CJ, Malila and Kaoma, JJS On 2nd April, 2019 and 11th June, 2019 For the Appellants: Mr. C. Chilufya of Messrs Derlick Mulenga 8s Co For the Respondent: Mr. T. T. Shamakamba of Messrs Shamakamba & Associates JUDGMENT Malila, JS delivered the judgment of the court. Case referred to: 1. Wilson Masauso Zulu v. Avondale Housing Project (1982) ZR 172 2. Attorney General v. Marcus Kapumba Achiume (1983) ZR 1 3. Damales Mwansa v. Ndola Lime Company (2012) 3ZR 268 4. Admark Limited v. Zambia Revenue Authority (2006) ZR 43 5. Fawaz & Another v. The People (Appeal No. 49/1994) 6. Nkata & Others v. Attorney General (1966) ZR 124 7. Augustine Kapembwa v. Danny Maimbolwa & Attorney-General (1981) ZR 127 J2 8. Moses Nondo Mubanga v. Gerorge Sepa Nkandu Fichite (2012) ZR (2) 264 9. Swift Cargo Services Limited v. Lake Petroleum Limited (SCZ Appeal No. 32 of 2016) 10. Mpongwe Farms Limited v. Dar Farms and Transport Limited (Selected Judgment No. 38/2016) Legislation referred to: 1. High Court Act, chapter 27 of the laws of Zambia Can good faith and fair dealing override express contractual provisions? This is, in a way, the broad question that arises in this appeal. The dispute relates to property sale and pignorative contracts concluded in respect of the same property on a back to back arrangement. The parties involved were the owner of the property cum mortgagor, the buyer cum mortgagor and two banks. The property owner’s interest was focused on redeeming the whole property from a mortgage and selling a portion of it. The buyer was interested in nothing less than what it bargained for and was indifferent whether it was part only of the property or the whole of it. The two banks were merely interested in cleaning up their loan accounts. J3 The second appellant was at all material times the owner of the property known as Stand No. 5519, Shinde Street, Ndola and was represented in all matters relevant to this dispute by the first appellant who was its Managing Director and Chief Executive Officer. The property had been pledged as security to Access Bank (Z) Limited (Access Bank) to secure a loan obtained by the second appellant from the later. The certificate of title relating to the property was accordingly endorsed with the Bank’s interest and deposited with the Access Bank. The second appellant defaulted in servicing the loan prompting Access Bank to successfully move the High Court for a foreclosure order. The appellants appealed to this court where, by a Consent Order on Appeal dated 2nd October, 2013, the appellants were granted indulgence to pay the outstanding debt in agreed instalments failing which Access Bank was to take possession and sell the property without recourse to the appellants. In time, the second appellant desired to sell part of the property to the respondent, presumably to clear the loan with Access Bank. With the second appellant being represented by the first appellant, it V J4 entered into some negotiations of sorts with the respondent. The respondent undertook an inspection of the property and was satisfied with it. On the 29th January 2014, the respondent addressed a letter to the second appellant stating, among other things, the following: We are satisfied with what we saw as it meets our requirements. We are therefore offering One Million Eight Hundred Thousand Kwacha (KI,800,000.00) as a purchase price for the property. Could you kindly proceed to give us a letter of offer [sic!]. On the 12th February 2014, the second appellant responded to the respondent’s letter of 29th January 2014, in the following terms: Dear Sir OFFER LETTER - PART PURCHASE OF STAND 5519 Refer to your letter of 29th January 2014, which offered One Million Eight Hundred Kwacha (KI,800,000) as purchase price for the part property stated as Baxget Building along Shinde Street. This is an offer letter of part of Stand No. 5519 Shinde Street Ndola, to Scooner Investments limited for the same amount. We are confident that this offer will be fulfilled as per attached condition of sale attached with the copy of title deeds. It is our expected hope that this sale will be of mutual benefits to both of us. J5 We wish you all the best and look forward to concluding the sale. Yours faithfully, BAXGET AUTO SERVICES LTD. Baxter Sichone MANAGING DIRECTOR & CEO According to the conditions of sale which were attached to the letter of sale the parties were to perform various obligations. Of relevance to the present dispute were the following clauses: The title deeds being with the bank, the seller and the buyer will be obligated to ensure that the AGREED seller/bank balances are paid in full as the negotiations are on-going. Due to the process a joint account must be opened between the two major signatories for transparency. The property being on one title will need to be subdivided as being offered upon the collection of title deeds from the bank. The offered area must be marked out clearly by a professional surveyor and understood that titles must be separated. With this process it can be stated that the title deeds and the subdivision process should be in process and title deeds split. 9. All services including electricity, water and sewer will have to be separated from one account and separate accounts initiated. These conditions were agreed to by signature of both parties. J6 The respondent was made aware of an existing mortgage over the property in favour of Access Bank. Against the agreed KI,800,000 purchase price for the property, the respondent paid the sum of K400,000. An additional K900,000 was deposited in a joint account opened for the purpose of clearing the mortgage with Access Bank. It would appear, however, that the second appellant was encountering hardships in clearing the outstanding loan to Access Bank so as to free the property and conclude the transaction with the respondent. Access Bank, which had already become the mortgagee in possession following a court order of foreclosure and sale, was desirous of selling the property. The respondent was interested in the property and so began to deal with Access Bank directly after the appellants defaulted to make instalment payment as per Supreme Court Consent Order. Access Bank, as mortgagee in possession, entered into an agreement to sell the property. The respondent, with the help of a facility from Standard Chartered Bank (Z) Ltd. (Stanchat) proceeded to purchase the whole property under additional terms set by J7 Stanchat. These included the undertaking that Access Bank was to be the vendor of the property, being the mortgagee in possession; that the court action between Access Bank and the appellants be withdrawn and that the appellants and their lawyers give consent to the sale of the property by Access Bank. On 15th July 2014, in obedience to one of the terms set by Stanchat, the appellants wrote a letter to Messrs Theotis Mataka & Sampa, Legal Practitioners, advocates for Stanchat, in which it stated inter alia that: We as BAXGET AUTO SERVICES LTD. are fully satisfied with the transaction of sale by Access Bank to Scooner Investment Ltd. as mortgagee in possession under the Standard Chartered Bank facilitation. We hereby confirm the said transaction as acknowledged by us and authorized. With the other conditions satisfied, Access Bank proceeded to sell the property to the respondent. Having acquired title to the property and having mortgaged it to Stanchat to secure its borrowing, the respondent then commenced legal proceedings against the appellants for a refund of the K400,000 paid towards the purchase J8 of part of the property. The respondent also claimed interest and costs. The appellants resisted the claim, insisting that what the respondent had contracted to buy was part only of the property and that in accepting the terms proposed for the sale by Access Bank of the whole property under the protected interest of Stanchat, the appellants were laboring under the belief that the sale of the proposed subdivision as originally agreed, would proceed after the mortgage to Access Bank has been liquidated. Riding on the back of their own faith in the perceived mutual understanding with the respondent regarding the sale of the subdivision after Access Bank was out of the picture, the appellants claimed to have proceeded to modify the existing structure to the portion of the expected remaining extent of the property after the proposed subdivision. In so doing they incurred expenses in the order of just over the equivalent of what the respondent had paid as a deposit towards the purchase of the subdivision. J9 Besides resisting the respondent’s claim for a refund of the K400,000, the appellants also counter-claimed an order for specific performance, costs and any other relief. The respondent, in reposte, pointed to the letter from the appellants dated 15th July 2014, addressed to Messrs Theotis Mataka & Sampa, from which we quoted earlier in this judgment, as allowing Access Bank to sell the entire property to it and that, by implication that letter brought the contract for the sale of the proposed subdivision to an end. It was also submitted that failure to refund the money paid as deposit on that intended sale would amount to unjust enrichment on the part of the appellants. The matter was heard by a High Court judge. She reasoned that there was one principal question to be resolved, namely whether the respondent was entitled to a refund of the K400,000 as claimed. To this, she added the subsidiary question whether Access Bank, as mortgagee in possession of the subject property, was entitled to sell the property as it did, to the respondent. J10 She answered both questions in the affirmative. She found that Access Bank had properly become the mortgagee in possession, duly entitled under court order to sale the subject property which it in fact did. Having sold the whole property to the respondent, it followed that there was no basis for the appellants to have continued to hold on to the K400,000 which they had received, and which in these circumstances, was paid for a consideration that had wholly failed. The learned judge thus ordered a refund of the K400,000 to the respondent with interest at short term bank deposit rate from the date of the writ to the date of judgment, and thereafter at Bank of Zambia lending rate. The learned judge also held that as the respondent has since bought the whole property, the appellants’ counter-claim for specific performance had no merit and was dismissed accordingly. Riled by that judgment, the appellants appealed on two grounds, namely first, that the lower court erred and misdirected itself when it held that the appellants had sold the entire property without considering the transaction in its entirety. Second, that it was a misdirection on the part of the High Court to have held that Jll title to the mortgaged property remained in the lender or mortgagee until the money lent, interest and other charges had been paid in full by the borrower. At the hearing of the appeal, Mr. Chilufya, learned counsel for the appellants adopted and relied on the filed heads of argument. In those heads of argument, and specifically in respect of ground one, counsel quoted extensively from portions of the judgment of the High Court, in submitting that the court below was wrong to have held that the appellants sold the entire property to the respondent. He cited the case of Wilson Masauso Zulu v. Avondale Housing Project^) where we stated that it was the duty of a trial court to adjudicate upon every aspect of the suit between the parties so that every matter in controversy is determined in finality. The learned counsel also referred to the case of Attorney General v. Marcus Kapumba AchiumeW where we emphasised the need for trial courts to undertake a balanced evaluation of the evidence presented to them at trial and not to focus only on the flaws of one side of the dispute. He also quoted section 13 of the High Court Act, chapter 27 of the laws of Zambia on the administration of law and J12 equity concurrently by the High Court, as well as on its general powers to grant relief. The learned counsel asked us the question in his submissions as to why the Bank (Access Bank) still needed the appellants’ consent when the terms under the Supreme Court Consent Order were clearly spelt out. Counsel also made numerous factual statements in his submissions. For exsunple, that the respondent did not produce any evidence in the lower court about it approaching Access Bank, or of bidding for the property or responding to the advertisement, and that there was no letter of offer from Access Bank to the respondent produced in evidence, or indeed any other communication. In any case, went on the learned counsel, the evidence of the respondent’s first witness (PW1) was that his bid never went through because as he came to learn later, the second appellant had obtained an injunction in respect of the property. Counsel also submitted that there was a contradiction in the finding by the lower court that the respondent purchased the property under private treaty when PW1 at the trial testified that the respondent purchased the property following an advertisement for J13 the sale of the property. Counsel also claimed that no evidence was led as to how Access Bank came to sell the property to the respondent. Mr. Chilufya then changed course in his submissions on ground one. He contended that the appellants, as defendants in the court below, did not have their reply to defence and counter-claim considered at all by the lower court. The High Court case of Damales Mwansa v. Ndola Lime Company!3) was referred to on the purpose of pleadings, with a passage from that judgment being quoted. Our decision in Admark Limited v. Zambia Revenue Authority!4) to the same effect was also cited. The learned counsel then spent a considerable amount of space explaining why he thought that the respondent’s witness was untruthful in the court below and what we said about the objective of cross-examination in the case of Fawaz & Another v. The People!5). He also explained his understanding and/or interpretation of the facts and why certain things happened as they did. Effectively the learned counsel attempted to give a splendid interpretation of the facts and the evidence. J14 The learned counsel finally veered into discussing how the property was mortgaged and the purpose of a mortgage and how mortgages work. He cited a number of case authorities in support of various principles in relation to mortgages. All this was done with a view to demonstrating to this court that the sale of the property to the respondent by Access Bank and the mortgaging of the same by the respondent to Stanchat, were not done regularly. More importantly perhaps, to persuade us to accept the position that notwithstanding all the documents signed and exchanged between the parties, the appellants had laboured under good faith and dealt fairly with the respondent on the tacit understanding that the respondent would reciprocate. In respect of ground two of the appeal, the learned counsel for the appellants began by quoting a passage from the judgment of the lower court as follows: The mortgagee exercised its power to sale pursuant to a consent order on appeal authorizing it to do so...on this evidence, I find the sale by Access Bank (Zambia) Li: ited of the whole property to the plaintiff, on the facts of this case was exercised within the powers of a mortgagee in possession...in the event, I find no basis for entertaining an order for specific perfor ance for the sale of property to a person who has already bought the whole property in issue. J15 On the basis of this passage, counsel submitted that although the court was on firm ground with respect to what the position of the law is, it misdirected itself on the application of the law and in failing to consider the mortgagor’s reversionary interest in the mortgaged property and the equitable right of redemption. Counsel finally submitted that to proceed with the sale, Access Bank was required to obtain the appellants’ consent. Thus, the sale of the property was not pursuant to the Consent Order on appeal in cause No. SCZ/8/210/2012. He fervidly prayed that the appeal be allowed and that the respondent be ordered to pay costs. In orally supplementing the heads of argument, Mr. Chilufya insisted that this was a proper case in which this court should interfere with the findings of fact by the trial court. He referred us to the case of Nkata & Others v. Attorney General!6) together with that of Augustine Kapembwa v. Danny Maimbolwa & Attorney-Generali7) which he said he had not covered in the filed heads of argument. When asked what the finding of fact by the lower court was which we must disturb, Mr. Chilufya responded that it was the finding that the appellants sold the entire property to the respondent. When further J16 asked where in the judgment that finding was, Mr. Chilufya referred us to a passage in the judgment of the lower court which read as follows: In the event, I find no basis for entertaining an order for specific performance for the sale of property to a person who had already bought the whole property in issue. When reminded that this passage did not state that the whole property was sold by the appellants to the respondent, the learned counsel referred us instead to another passage in the judgment which reads: As the plaintiff has since bought the whole property, there cannot be a valid claim for sale of part only of the same property which now belongs to the plaintiff. We took Mr. Chilufya through the judgment of the lower court in the hope that he would understand that the court did not, as the ground of appeal claims, make any finding that it was the appellants who sold the entire property to the respondent, but rather that the entire property was sold by Access Bank to the respondent. We even showed Mr. Chilufya a passage in the judgment which clearly stated that the finding of the court was that Access Bank sold the property to the respondent. Rather than rethink the argument he was making J17 under ground one, Mr. Chilufya plowed on with impregnable faith in the hope that he would convince us that the finding of fact was otherwise than set out, letter perfect, in the judgment of the lower court. Even when we asked the learned counsel to indicate in which way the finding was perverse and not borne out of the evidence before the court, the learned counsel was far from convincing. His further effort to augment the heads of argument exposed the seeming ineptitude on the part of the appellants to formulate properly the grounds of appeal and corresponding arguments. He nonetheless beseeched us to uphold the appeal on both grounds. In responding to the arguments put forth by the appellants’ learned counsel, Mr. Shamakamba, for the respondent, equally relied on the heads of argument. In those heads of argument, he submitted, in relation to ground one of the appeal, that there was no misdirection on the part of the lower court as alleged as the appellants themselves authorized the sale by the Bank of the entire property. He referred us to the letter from the appellants to Messrs Theotis Mataka & J18 Sampa dated 15th July 2014, which we quoted earlier on in this judgment. Counsel added that the appellants did not, at the time of giving their consent as captured in the letter, request the Bank to take into consideration their private contract with the respondent. Mr. Shamakamba also quoted from the letter dated 15th July 2014, from CKM Associates, advocates for the appellants, to Messrs SLM Legal Practitioners, advocates for Access Bank, which read, so far as is material to these proceedings, as follows: Since the matter has been concluded by consent duly signed by all parties, we do have the instructions to infor you to ;o ahead and sell the subject property as mortgagee in possession. The learned counsel for the respondent also quoted clause 3 of the Consent Order settled by the appellants and Access Bank in the Supreme Court which entitled Access Bank, on default by the appellants to pay any instalment, to take possession and sell the mortgaged property, being Stand No. 5519 Ndola. Counsel submitted that on the evidence, it was not in dispute that the appellants had received KI,300,000 from the Bank; had repaid K900,000, leaving a balance of K400,000 unpaid. They J19 defaulted in making good of the balance and hence the Bank’s right to sale. As long as the debt was not fully settled the appellants had no legal or equitable right to sale any part of the property, and on this basis, the claim for specific performance cannot be sustained. He posited that the purported sale of the property by the appellants to the respondent was a nullity. We were referred to the case of Moses Nondo Mubanga v. Gerorge Sepa Nkandu FichiteW as authority for that submission. We are grateful to both counsel for their efforts. Upon reflection on the arguments advanced by counsel in respect of ground one of the appeal, we have no trepidation in dismissing the first ground of appeal. The law is loud that as an appellate court we are not to routinely disturb findings of fact made by a lower court as a tribunal of facts. A wealth of case law has crystallised the parameters within which we may interfere with finding of fact. No useful purpose will be served to restate in any extended way the principles here, let alone list the legion of case authorities in which those principles were explained. The learned counsel for the appellant has referred to some of those authorities. J20 Suffice it to state that where the fulcrum of the appellant’s complaint under an appeal comprises a challenge of finding of fact, it behooves the appellant to properly demonstrate what finding or findings of the lower court are the subject of displeasure and in what respects those findings were not borne out of the evidence before the trial court. Stated in less elevated language, it is incumbent upon the appellant appealing against a finding of fact to convincingly demonstrate that, measured against the evidence given before the lower court as a trier of facts, the finding of fact by that court was so glaring and awkward that it defies any logic of deduction. In other words, that the finding comes neither as a natural and logical inference, nor as a redactable conclusion from the evidence before the court. The finding must be incompatible with the evidence tendered. As we have repeatedly stated in earlier authorities of this court, the finding must be perverse. Thus in Swift Cargo Services Limited v. Lake Petroleum Limited^ we reiterated the point that for any party to succeed on any ground impeaching solely findings of fact by a lower court, it ought to be definitively shown that such findings were J21 perverse, or made in the absence of evidence, or upon a misapprehension of facts, or that on a proper view of the evidence, no trial court, acting correctly, could reasonably make. We have already narrated how the learned counsel for the appellants struggled to identify the passage in which the lower court is alleged to have made a finding of fact that it was the appellants, and not Access Bank, who sold the entire property to the respondent. Even after we directed counsel’s attention to the correct portion of the lower court’s finding in which the court made a clear statement that it was Access Bank that sold the entire property to the respondent, counsel failed to do the honourable thing of admitting that the drafter of the ground of appeal had goofed in structuring that ground and used a clearly misapprehended historical and factual position. We think, we respect to the learned counsel for the appellant, that the criticism against the trial court under ground one is without basis. Granted that the chronology of events in this dispute places throughout, Access Bank as the vendor of the property at the epicenter of the conveyance of the property to the respondent, the J22 fallacy of ground one of the appeal and the arguments of counsel relative to it are self-evident. We are of the considered view that the lower court did not err in making the finding that the entire property was sold by Access Bank to the respondent. The court did not make any finding that it was the appellants who sold the property to the respondent. The lower court’s finding is thus unassailable. Ground one must fail, and we dismiss it accordingly. Ground two of the appeal alleges a misdirection in the holding of the lower court that title in the property remains in the lender until the money lent and interest is paid in full. The appellants, according to their counsel, have no complaint about the law as explained by the lower court. What they have difficulties with is the application of the law and the alleged failure to consider the mortgagor’s reversionary interest in the mortgage. Counsel did not care to explain in what respects the law was misapplied or indeed how the appellants’ equity of redemption was adversely affected or prejudiced. J23 Our reading of the judgment shows that the lower court judge was fully alive to the existence of the equity of redemption and explained the legal position correctly. She was, in our view, rather measured in her treatment of the mortgagee in possession’s right to sell and the mortgagor’s right of redemption. She acknowledged that this latter right of course, continues to subsist for as long as the mortgage is subsisting or is allowed to run. And that accords with our observation in Mpongwe Farms Limited v. Dar Farms and Transport Limited!10), where we stated that: ...as long as the mortgage subsists, the mortgagor’s equity of redemption remains intact. We say so because redemption of the mortgaged property is of the very nature and essence of a mortgage in equity. It is inherent in the mortgage itself and cannot be clogged or impeded upon by design, or contrivance or default, or be left to the whims of the mortgagee. The equity of redemption is, however, lost the moment the mortgagee in possession exercises the right to sale. In this particular case, the history of the loan is well recorded in the documents in the record of appeal. The loan repayment by the appellants to Access Bank was unsatisfactory. By consent of the parties, we allowed Access Bank to sell the property if default in paying instalments occurred - as it in J24 fact did. The property was sold with the full consent of the mortgagor. It is thus preposterous for the appellants, as mortgagor to raise the issue of their right of redemption. The appellant could not rely on mere good faith and a perception or expectation of morality or fairness on the part of the respondent, to supersede the express commitments that were exchanged by the different players in this dispute post the agreement with the respondent to sell a portion only of the property. As it turns out, performance of the earlier agreement to sell the proposed subdivision of the property was, by reason of the expressly agreed arrangements to which the appellant was central, rendered impractical. We fully agree with the decision of the lower court on the issue of specific performance. It cannot, in these circumstances, be ordered. It was properly rejected. The appellants are entitled to a refund of their money with interest as ordered by the lower court. Ground two equally fails. J25 This appeal is destitute of merit and is accordingly dismissed. The respondent shall have its costs to be taxed in default of agreement. I. C. Mambilima CHIEF JUSTICE ^-M/Malila SUPREME COURT JUDGE R. M. C. Kaoma SUPREME COURT JUDGE