Cavmont Merchant Bank Limited v Mukushi District Cooperative Union Limited (2000/HP/978) [2020] ZMHC 476 (28 September 2020)

IN THE IDGH COURT FOR ZAMBIA AT THE PRINCIPAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN - . INCIP -- SEP 2 . . .. r 2000/HP/978 ' ~ /. CAVMONTMERCHANTBANKLIMI . PLAINTIFF AND MKUSID DISTRICT CO-OPERATIVE UNION LIMITED DEFENDANT Before the Hon. Lady Justice C. Lombe Phiri in Chambers For the Plaintiff E. C. Chienge -C C Mwansa & Associates For the Defendant M Manda - ML Mukande & Co JUDGMENT CASES REFERRED TO: 1. lnvestrust Bank Pk and Alice Sakala T / A Matunga Enterprises Appeal no 195/2015 2. Savenda Management Services v Stanbic Bank Zambia Limited, Selected Judgment No. 10/2018 3. Mkushi District Cooperative Marketing Union v Stanbic Bank Limited and another SCZ Judgment No.41 of 2008 This is a matter that was commenced by way of Writ of Summons and Statement of Claim. The initial pleadings were amended and the final claim endorsed on an amended Writ of Summons filed into Court on 18th June 2015 states the Plaintiff's claim as: i) The outstanding debt of K14,305,984 as of J(fh November, 1997 on a loan advanced to the Defendant by the Plaintiff which loan the defendant has failed to pay; it) Any other relief as the Court may deem fit; iii) Interest on the said amount; and iv) Costs. In their amended Statement of Claim filed on even date the Plaintiff states that it is a limited company incorporated in Zambia and that the Defendant is a cooperative union duly registered in Zambia. It is claimed that on or about 16th September, 1996 the Defendant applied for a loan in the sum of K350,000,000 from the Plaintiff for purposes of maize marketing. That after consideration of the Defendant's application the Plaintiff, on or about 27th September, 1996 approved the Defendant's loan application. Approval of the loan was concluded by way of agreement whose salient points were that: a) The loan would be secured by a stock of 30,000 bags of maize owned by the Defendant at its Masansa Depot valued at K465,000,000. J2 I Page b) A non-refundable arrangement fee in the sum ofK17,500,000 to be paid by the Defendant to the Plaintiff. c) The said loan was to be repaid in full not later than 27 th December, 1996 by settlement of the sum ofK465,000,000 together with the arrangement fee of Kl 7,500,000. d) That default by the Defendant to repay as pledged would entail the Plaintiff taking possession of the maize bags in Masansa. Having agreed as afore stated the monies were disbursed by the Plaintiff to the Defendant. However, the Defendant failed to pay the loan by 2th December, 1996. The Defendants further resisted the Plaintiffs efforts to recover the maize as per agreement. The Defendants later allowed the Plaintiffs access to their maize stock at various different sites but the same fell short to cover the outstanding debt. Taking into account the amounts paid as deposits by the Defendants from proceeds of maize sales, which were credited to the Defendant's loan account over a period up to August 1997 altogether amounting to K419, 757,150; and the amount of K246,090,018 representing storage charges due to the Defendant under a separate contract with the Plaintiff and credited to the loan account, as reconciled and agreed between the parties in February, 1998 the Defendant's loan indebtedness as from 30th November, 1997 stood at K14, 305,984 plus interest as per the contract. J3 I Page The Plaintiffs now claims: 1) The outstanding debt of K14,305,984 as of 3(/h November 1997; 2) Any other relief as the Court may deem fit; 3) Interest on the said amount; and 4) Costs. In response to the Plaintiffs claim the Defendant initially filed into Court a Defence. The same was later amended and a Counter - claim filed in addition. The crux of the Defence was that the Defendant repaid the bulk of the debt by surrendering 32, 423 x 90 kg bags of white maize valued at K571,609, 824.00. They further stated in their Defence that agents of the Plaintiff broke into the Defendant's storage shed at Kakwelesa Mkushi and collected 2,240 x 90 kg bags of maize. That as a result the Defendant does not owe the Plaintiff any money. In their Counter claim the Defendants claim that during the course of collecting maize the Plaintiff or its agents stole 300 new jute empty grain bags each valued at Kl 700 having a total value of KSl0,000. That the said grain bags have not been replaced by the Plaintiff. It was further stated that the Plaintiffs collected a further 32,423 bags and the jute bags were not returned, as per standard market practice. The value of the unreturned jute bags was K32, 423,000. It was further stated that the Defendants had over paid the Plaintiffs by Kl2,004, 176.00 and this over-payment had not been refunded. Further, that the Plaintiff owed the Defendant the sum of K246,090,018.00 as outstanding fees under the Agricultural Credit Management Program. As a result the Defendant was making the following counter claim: J4 I Page 1) The value of 300 new jute grain bags in the sum ofZMK510,000.00; 2) The value of 32, 423 unreturned jute grain bags in the sum of ZMK32,423, 000. 00; 3) The sum ofZMK12,004,176.00 being over-payment to the Plaintiffs; 4) The sum of ZMK246,090,018.00 being the value of services rendered to the Plaintiffs under the Agricultural Credit Management Program; 5) Any other reliefs the Court may deem fit,· and 6) Costs. At the trial the Plaintiff and Defendant each called one witness. The Plaintiffs witness was Martha Lungu Sichone, a Rehabilitation and Recoveries Manager in the Plaintiff Bank. In her evidence she confirmed that the Defendant had been granted a loan facility by the Plaintiff. In her testimony she spoke to loan statements that were contained in the Plaintiffs Bundle of documents. She further testified that the Plaintiff had incurred certain charges such as transport costs and weighbridge charges which were debited to the Defendant's account. There had also been an accumulation of interest. Following a reconciliation exercise between the Plaintiff and Defendant it was discovered that the Plaintiff in fact owed the Defendants K246,090,018.00 in storage charges. The said amount was deducted from the outstanding loan amount and the balance owing was reduced to Kl4,305,984.00. In relation to the counter claim the witness also testified that regarding the stolen jute grain bags , there was no Police report to support the JS I Pa g e evidence. Under cross examination the witness testified that the maize collected from the Defendant was sold in order to recover the debt owed by the Defendant. That the pledged amount was 30,000 bags of maize and the Defendant collected 30,133 bags. She further explained that interest was charged on the transport costs because it was an expense incurred by the Bank as a consequence of the loan. She however, conceded that the adding of expenses and charging of interest was not a provision contained in the Facility Letter, which constituted the agreement between the Plaintiff and Defendant. The witness stated that according to the schedule the amount incurred from expenses was K38,249,624.00. In re-examination the discrepancy in the total sales was explained and clarified as 2630 bags with a value of K412,541,400.00 The Defence witness was Harrison Kalota, the General Manager of the Defendant Cooperative. He confirmed that the Defendant got a loan of ZMK350,000,000 from the Plaintiff and pledged 30,000 bags of maize valued at K465,000,000. He further testified that the Plaintiff collected a total of 27, 363 and the said maize was sold to Chimanga Changa, Sansin and Jamas. The witness further referred the Court to a letter between the parties which indicated that the amount owed was K260,396,002.00. The witness testified that the Defence witness testified that the amount owed as at November, 1996 was K416,502, 792, as the amount had been over cast by Kl ,000,000. It was testified that by 11 th July, 2017 the Plaintiff had collected its collateral in full and the same was oversubscribed by 138 bags. He further testified that on 11 th July, 1997 the Plaintiff's agents broke into the Defendant's shed at Kakulesa. The witness also testified that in July, 1997 the maize was fully delivered however, the interest on the loan amount continued to accrue. Regarding the JG I P age 300 new jute bags, the witness testified that the Plaintiff collected the jute bags and the Court was referred to a letter which the Defendant wrote to the Plaintiff reminding them of the collected grain bags. The witness testified that the Defendant actually overpaid on the loan and they were owed K246,090,018 in storage charges. Under cross examination the witness stated that following reconciliation between the parties it was agreed that the Defendant was owed K246,090,018 on the ACMIP account and it was not supposed to be credited to the loan account. It was also stated that the Defendant did not formally write to the Plaintiff to complain about the transport and weighbridge charges. He also testified that the report for stolen jute grain bags was made to the Police at Kabwe but that the Police Report was not before the Court. It was further submitted that a letter on the record showed that the Defendant had informed the Plaintiff about the stolen jute bags. It was also stated that the Goods Received Notes in the Defendant's exhibits showed that 32,432 bags of maize were collected at Kakwelesa by the Plaintiff. That the Plaintiff should have either returned the grain bags or paid for them and neither was done. In re-examination the witness stated that as normal practice, the Plaintiff should have collected the empty grain bags from the millers. Further that the reconciliatory meetings resulted in a deadlock because the Plaintiff did not take into account all the maize collected. Both parties filed into Court their written submissions where they took time to summarize the pleadings and evidence before the Court. J7 I Page PLAINTIFF'S SUBMISSIONS In their submissions the Plaintiff pointed out that the main issues to be resolved were the quantities and values of maize delivered and sold on account of the Defendant. It was submitted that the Plaintiff's account of the maize quantities and values amounting to K414,757,150 as reflected in the letter of demand and statement of account should be accepted as a valid account. It was further submitted that amounts owed on the ZAMSIP account were paid to the Defendants, as was evidenced by the handwritten input at page 13 of the Plaintiff's bundle of documents. It was also submitted that the Defendant did not demonstrate with evidence how they computed the total values but instead made an estimation as though each 90kg bag was in fact in weight 90kg yet the weight was only determined after weighing of the bags at the weighbridge. It was further submitted that the amount of maize collected and the value of the maize were not paid off in full as alleged by the Defendant. It was stated that the evidence of the Defendant at trial was contradictory to its pleadings and should be rejected. The Court was further urged in the submissions to reject the testimony of the Defendant that their warehouse at Kawkwesa had been broken into by agents of the Plaintiff. It was submitted that the evidence at trial showed that the empty grain bags were in fact accounted for as described in the GRN s. This court was urged to find for the Plaintiff that the quantities of the maize collected and sold were 27,363 bags valued at K419,757,150.00. The other issue raised by the Plaintiff was whether the transport and weighbridge charges were lawfully charged to the Defendant's loan account. It was submitted that in is not in dispute that the maize was collected in order to enforce an agricultural charge. It was further submitted that according to the evidence of the Plaintiff's witness it is banking practice to post any such JS I P age expenses incurred on account of a client to its account. It was submitted that the Defendant had failed to effect the sale and settle the loan account, hence the Plaintiff's intervening by way of realizing the security. The transport and weighbridge charges were therefore incurred as incidental to the seizure and sale of the maize. It was further submitted that there was no need for the facility letter to reflect that these charges would be added to the client's account as this is provided for in Section 4(1) and (2) of the Agricultural Credits Act, Chapter 224 of the Laws of Zambia. It was further submitted that in the case of Investrust Bank Pk and Alice Sakala T / A Matunga Enterprises Appeal no 195/2015<1 > the Court confirmed the position of the law with regard expenses incurred. This Court was also invited to take judicial notice of the fact that banks operate on customers' money at a cost by way of interest on deposits, hence the practice of adding such expenses to the client's loan account balance which is charged interest. These direct expenses being actual incurrences by a bank on loan account of a client are distinguished from usual bank charges such as monthly ledger charges which are not direct expenses and are prohibited by courts from incurring expenses. It was also submitted that even in the event that the interest on the charges was not considered the general liability of the Defendant would not be reduced in any significant amount. This court was also asked to consider whether the evidence led by the Defendant at trial relating to matters not pleaded should be accepted. It was submitted that the Defendant did not prove the allegations in their defence that they delivered 32,423 bags of maize thereby paying off the whole debt. Further that there was evidence by the Defendant that charges incurred from the seizure where not properly incurred was also not pleaded even though alluded to in the evidence. It was submitted that it is an Jg I Page established principle that courts are not precluded from considering evidence with regard to unpleaded evidence. However, that when Courts exercise their discretion they ought to do so on such evidence founded on a firmly supported finding of fact and not merely on unproven claims or allegations. Reference was made to the case of Savenda Management Services v Stanbic Bank Zambia Limited, Selected Judgment No. 10/2018<2 > to demonstrate the principle that a Court may consider evidence not pleaded. It was further submitted that the evidence of the Defendant was contested in cross examination. In relation to the Counterclaim it was submitted that the Defendant failed to provide proof that the Plaintiff's agents stole the 300 new jute bags. Further that no proof was provided regarding the value of the bags to justify the cost of K510,000 being claimed. It was also argued that the claim regarding the unreturned empty grain bags was not supported by any evidence. It was submitted that the absence of any invoice or demand note in relation to the grain bag at the close of the seasons' transactions was an indication that there was no basis for the claim as it was not made within a reasonable time. In the alternative it was submitted by the Plaintiff that the equitable defence of latches should prevail, under the circumstances, as if indeed the bags were not returned, the Defendant had slept on its right to claim as more than 15 years had passed since the event. JlO I P a g e It was also argued that the Defendant had failed to prove the claim that they had overpaid the Plaintiff. Regarding the claim for K246,090,018 for storage charges it was submitted that the amount was no longer owed by the Plaintiff as the same had been offset against the loan account. It was submitted that the current amount owed by the Defendants now stood at K14,305 ,984. DEFENDANTS SUBMISSIONS It was the Defendants submissions that the Plaintiff had failed to prove their claim. It was submitted that the Plaintiff had under declared the bags of maize it had sold to various customers therefore giving an impression that there was a shortage. It was submitted that a total of 2,820 bags of maize had remained unaccounted for. It was further submitted that the Plaintiffs inflated the Defendant's liability by including transport charges and charging interest to the loan account. The Defendant submitted that it was common practice in maize marketing for maize to be sold ex-stock. This means that the buyers of the maize collect the maize from the seller's storage facility at their own expense therefore there is no transport cost to the seller. It was submitted that in casu the Plaintiff decided to deliver maize to the millers thereby incurring unnecessary transport charges which it sought to add to the loan account. It was further submitted that the DWI demonstrated at trial that the Plaintiff added Kl,000,000 to the Defendant's loan balance. Further, that the Plaintiff continued adding compound interest to the loan amount thereby inflating the Jll I P a g e amount due. It was submitted that in view of the foregoing the true liability of the Defendant could be summarized as per computation as shown on a schedule attached to the submissions. Regarding the unreturned grain bags it was submitted that they were of value. The case of Mkushi District Cooperative Marketing Union v Stanbic Bank Limited and another SCZ Judgment No.41 of 2oos<3> was relied on to demonstrate this point. It was also submitted that the Plaintiff owed the Defendant K246 ,090, 018 on the Agricultural Credit Management program. The Defendant refuted the claims by the Plaintiff that the amount had been credited to the ZAMPIP loan account. In total it was submitted that the Plaintiff had failed to prove its claims against the defendant and their claims should be dismissed with costs. REPLY In reply the Plaintiff reiterated that the Defendants neither responded to their letters of demand nor did they produce any evidence that goods had been collected from them therefore they had failed to defend the matter. It was further submitted that reweighing of the bags of maize was necessary as the bags of maize collected from the Defendant were not in standard weights. It was submitted that in the process of reweighing the Plaintiff incurred weigh bridge charges resulting in the maize being sold at different prices. J12 I Page It was also submitted that the schedules in the Defendants Bundle of document were not sufficient proof that 30,000 bags were collected, transported and sold by the Plaintiff. Regarding the practice of sale of maize ex-stock it was submitted that had this been the practice the Defendant would not have failed to sell the maize on its own thereby resulting in it failing to service the loan. It was further submitted that the Plaintiff was not in the business of maize marketing. It was finally submitted that the Annexure to the submissions amounted to Counsel giving evidence at the Bar. It was further submitted that should the same be allowed the computations reflected on the said schedule were in contradiction to the Defendant's pleadings. FINDINGS OF FACT From the summary of the pleadings and evidence it is clear that it is not in dispute that there was a contractual relationship between the Plaintiff and the Defendant arising from a loan agreement entered into between the parties sometime in 1996. It is also not in dispute that the said loan was disbursed and secured by stock of maize grain in the amount of 30,000 bags altogether valued at K465,000,000.00 (unrebased) It is further not in dispute that at the end of the agreed period the Defendant had defaulted on payments as agreed in the Loan Agreement. As a result the Plaintiff moved in to enforce the security pledged. It is also not in dispute that the Plaintiff collected maize stock in grain J13 I Page bags from the Defendant's warehouse. It is also not in dispute that there was a parallel arrangement between the parties called ZAMPIP where the Defendants provided storage facilities to the Plaintiff. It is also not in dispute that from this arrangement storage charges accrued. The foregoing facts not being in dispute I find them as a fact. Further evidence led by the Plaintiff relates to schedules that were drawn up and documentation that was filled out regarding the quantities of maize that was being collected. I find that although there were a few questions asked regarding certain unclear entries the evidence of the Plaintiff was unshaken. I therefore find that this evidence of the Plaintiff was a true reflection of the quantities that was collected. Regarding the schedule attached to the submissions this evidence cannot be accepted. This is evidence that the Defendant's are trying to introduce after the close of Pleadings and trial. No grounds are advanced to admit it. ANALYSIS In the mam claim the court is called upon to determine the amount outstanding, if any. This includes amounts allegedly owed as a result of the Plaintiff executing the security pledged upon default by the Defendant. J14 I Page On the counterclaim the Court is invited to determine whether any liability extended to the Plaintiff for unreturned grain bags, stolen grain bags and storage charges under the ZAMPIP program. MAIN CLAIM The anchor of the main claim lies in the Credit Facility Letter dated 22nd December, 1997, which was exhibited as part of the evidence. The said facility letter contains the terms of engagement between the parties. Other than that the parties testified as to what is common market practice. It is common ground that the arrangement between the parties was that of lender and borrower. It is also not in dispute that the Defendant, who is the borrower in this case, defaulted on the loan. The Plaintiff claims that as was standard practice firstly interest was to be charged on the amount borrowed and further interest in the event of default. The Plaintiff also wants the Defendant to pay for the money it spent on enforcing the security when it collected the maize stock from the Defendant's depots and transported it to millers. Further, it wants the Defendant to pay for the weighbridge charges it incurred when having the maize stock measured. In its defence the Defendant contended that had the Plaintiff followed the normal market practice the charges for which it is being held liable would not have been incurred. According to the evidence of DWl the market practice was for the millers to collect the maize stock from the depot therefore no cost of transportation is incurred by the vendor or agent, as the case may be. Further, that the interest being claimed by the Plaintiff was not agreed upon by the parties and was excessive. JlS I Page A perusal of the evidence on the record shows that it the Agreement between the parties included a clause to the effect that any cost incurred as a result of or incidental to securing the security pledged by the borrower would be met by the borrower. In this case there was a reason for the Plaintiff to get the maize and transport it to the available market as it was trying to realise the money it lent to the Defendant. It can be stated that this was a cost resulting from or incidental to the execution of the pledged security. There was no proof brought before the Court to show that the Plaintiff acted outside the normal course of business. The course of business being that as between lender and borrower. I therefore find that the defence by the Defendant fails. Further, evidence led by the Plaintiff and amendment to the statement of claim shows that the balance that was owed to the Plaintiff reduced after the Plaintiff seized the maize stock and sold it. Further, that the Defendant's loan account was credited with the amount averred by the Plaintiff in storage charges. I find that the Plaintiff has proved to the satisfaction of the Court that the Defendant owes it K14,305,984 (unrebased). The claim by the Plaintiff succeeds and is to be paid with interest at the current bank lending rate from the date it became due and payable. COUNTERCLAIM In its counterclaim the Defendant has claimed the value of unreturned grain bags was K32, 423 ,000 . This was from the 32, 423 bags that were seized. The standard market practice was that empty grain bags are returned after a buyer collects maize from the vendor otherwise the buyer is charged the value of the J16 I P age empty grain bags. Further, that a total of 300 new jute empty grain bags each valued at Kl 700 having a total value ofKSl0,000 also went missing during the seizure process. That the said grain bags have not been replaced by the Plaintiff. It was also counter claimed that the Defendants were overcharged by the Plaintiff. A critical look at the evidence shows that while it is irrefutable that the grain was collected in bags, there is no evidence that the empty grain bags were ever returned by the Plaintiff to the Defendant. There is evidence that a reminder was sent to the Plaintiff for the grain bags. The only conclusion that can be drawn from the silence of the Plaintiff regarding the return of the grain bags is that the said grain bags were not returned. While it has been pointed out that the relationship between the parties was that of lender and borrower it is also true that the grain bags have value. There is no dispute about this. The Defendant succeeds on this counter claim. The Plaintiff should pay the Defendant the full value of the empty grain bags as claimed by the Defendant. The said amount will attract interest at the current bank lending rate from the date of this judgment until it is paid. Regarding the stolen bags I find that on a balance of probabilities there is no proof led that the bags were in fact in the warehouses from where the maize was collected. Other than assertions of DWI there is no evidence of any stock sheet or a formal complaint to the Police to show this. I have great difficulty in finding therefore that there were any bags that were stolen. I therefore find that this Claim fails. J17 I P ag e Regarding the overpayment, again I find that there has been no convincing explanation rendered by the Defendant to support this claim. PWl testified that whatever amount that could have been charged in excess was reversed and the same credited to the Defendant's account. This counter claim also fails. I find that the Plaintiff having succeeded on its claim and the Defendant equally having succeeded on one of its Claims in the Counterclaim I will order that each party bear its own costs. Leave to Appeal is granted. Delivered at Lusaka this 28th day of September, 2020. C. LOMBE PHIRI JUDGE J18 I Page