Celtic Freight Zambia Limited v Kashy International Limited (Appeal No. 189/2022) [2023] ZMCA 340 (23 November 2023)

IN THE COURT OF APPEAL OF ZAMBIA HOLDEN AT NDOLA Appeal No. 189 / 2022 (Civil Jurisdiction) BETWEEN: ---2 3 NOV 2023 ,, Or· ~ • , CELTIC FREIGHT ZAMBIA LI APPELLANT AND KASHY INTERNATIONAL LIMITED RESPONDENT Coram: Kondolo, Majula & Chem.be, JJA On 16th November, 2023 and 23rd November, 2023 For the Appellant Ms. J. M. Mutemi ofTheotis Mutemi Legal Practitioners For the Respondent Mrs. L. Mushota of Mushota & Associates JUDGMENT MAJULA JA, delivered th e Judgm ent of th e Court. Cases referred to: 1. Isaac Lungu vs Kalikeka - SCZ Appeal No. 114/2 018 2. Sir Lindsay Parkinson and Company Limited vs Triplan Limited (1973) 2 ALL ER 2 73 (CA) 3. Lamposter Company Limited vs Njalili - SCZ Appeal No. I 05/2 015 4. Isaac vs Mbewe- SCZAppeal No. 114/2 013 J2 5. Zambia National Commercial Bank Plc vs Chainama Hotel Ltd and Another - SCZ Appeal No 85/ 2 011 6 . Natural Valley Limited vs Zambia Revenue Authority - SCZ Appeal No. 12 of 202 1 7 . Nkhata & 4 Others vs The Attorney General (1966) ZR 14 7 8. Bomiface K. Mwale vs Zambia Airways Corporation Ltd (In Liquidation) (1998 ZR 71 Legislation and other authorities referred to: 1. The High Court Rules, Chapter 27 of the Laws of Zambia. 2. Halsbury's Laws of England volume 3 7, 4th edition (London, Butterworths, 1997) 3. The Rules of the Supreme Court of England 1965, White Book (1999) edition 1.0 Introduction 1.1 The genesis of this appeal is from a Court Order dated 9 th June, 2022 in which the Honourable Lady Justice E. P. Mwikisa of the High Court rendered a ruling dismissing the appellant's application for security for costs amounting to K300 ,000. Aggrieved by this decision, the appellant has now come before us to seek redress. 2.0 Background 2 . 1 The brief background is that the appellant had made an application for security for costs in the sum of K300 ,000 in the High Court. This application was vigorously opposed by the J3 respondent by way of filing an affidavit in opposition. In reaction to this, the appellant filed an affidavit in reply on 22 nd March, 2022. Hearing of the matter was on the 3 rd of March, 2022 and the ruling was reserved. A decision subject of this appeal, was subsequently rendered. 2.2 At the time the matter had come up for hearing, the appellant was not in attendance. The appellant then proceeded to apply to set aside the Order of the Court dated 3 rd March, 2022 and for rehearing of the application for security for costs. Notwithstanding this application, the Judge rendered her ruling on the application for security for costs on 9 th June, 2022. 3.0 Decision of the Court below 3.1 After having examined the record and the arguments that were before her, the learned Judge refused to stay proceedings of the matter on account of the fact that it had dragged on for a long period of time. She noted that the majority of the directors of the appellants were of foreign origin coupled with their intention to relocate to South Africa as far back as 2019. 3.2 She further expressed the view that the respondent was a Zambian Company which was still a going concern. And following the guidance in the case of Isaac Lungu vs Kalikeka 1 she was of the view that the application for security for costs amounting to K300,000 was oppressive and was intended to J4 further delay the respondent's case. On account of the foregoing, she refused to grant the application. 4 .0 Grounds of appeal 4.1 Disconsolate with the ruling of the court below, the appellant has approached us fronting five grounds of appeal set out as follows: "l. The learned High Court Judge erred in law and in fact when in determining the application for security for costs, she considered extraneous matters which were not relevant for determination of the application. 2 . The learned High Court judge erred in law and infact when she dismissed the appellant's application for security for costs on ground that the respondent was still operational and of fixed abode in ignorance of the affidavit evidence which showed the contrary. 3. The court below erred in law when she found the application for security for costs was oppressive and intended to stifle a genuine claim in the absence of evidence and based on a wrong analogy that the appellant was a large company seeking to shut down a small company. 4. The learned High Court Judge erred in law and in fact when she failed to observe the Rules of the High Court and Natural justice in: JS (i) Adjudicating a matter for delivery of Ruling on account of none-attendance of the movant of the application; (ii) Delivering a Ruling based on documents on record without considering the appellant's affidavit in reply and indicating that the appellant had representation at the hearing when inf act not; and (iii) Proceeding to deliver a Ruling on 9th June, 2022 notwithstanding the filing of an application for rehearing of the application for security for costs and the court's appointment of 19th May, 2022 as the date for hearing of the said application. 5. The learned High Court Judge erred in law and inf act when she delivered her ruling on the application for security for costs based on the documents filed in court without securing the consent of the appellant in accordance with the case of Natural Valley Limited vs Zambia Revenue Authority Appearance Appeal No.12 of 2021 ." 5.0 Appellant's arguments 5.1 The appellant's Counsel submitted in relation to ground one that the factors a court ou ght to consider on whether or not to grant an application for security of costs were discussed by Lord Denning MR in Sir Lindsay Parkinson and Company vs Triplan Limited2 and cited with approval in the case of Lamposter Company Limited vs Njalili3. J6 5.2 That instead of restricting itself to the application for security for costs, the lower court proceeded to delve into issues pertaining to a stay of proceedings when that was not the application before her. 5.3 Counsel pointed out that the application for security of costs was independent of any prior applications and th at the court had made findings based on extraneous matters that had no bearing on the application for security for costs. We were thus urged to uphold this ground of appeal. 5. 4 Pertaining to ground two, learned Counsel observed that the appellant provided credible testimony of its belief that there was need for security for costs but was allegedly not considered by the lower court. This led to the court making a finding that the respondent was of fixed abode in the face of contrary evidence provided by the appellant. To reinforce his submission, Counsel referred us to a passage from Halsbury's Laws of England volume 37, 4 th edition at paragraph 1183. 5.5 Moving on to ground three, the main point taken by Counsel for the appellant was that the appellant's application for security for costs was founded in law with the appellant having reasonable ground to believe that the respondent was no longer operating as a going concern, or had changed its address. In such circumstances, the court is empowered to order security J7 for costs. In this regard, Order 23 Rule 1 (d) of the Rules of the Supreme Court of England3 was cited as authority. 5. 6 Counsel further asserted that the schedule of expenses exhibited was meant to help the court assess the expenses the defendant is likely to incur in defending the claim. That the sum of K300,000 could not be said to have been oppressive or intended to stifle a genuine claim. Counsel contended that the sum was justifiable considering the length of time taken for the proceedings. 5.7 The learned Counsel went on to argue that the burden of proving that the application for security for costs would have the effect of stifling the respondent's claim lay on the respondent. The case of Isaac vs Mbewe4 was cited as authority. That in any case the respondent did not allege that the application was intended to stifle its claims. We were therefore urged to reverse the findings of fact on this issue on the basis that there was no evidence led on this aspect. 5.8 Pertaining to ground four, learned Counsel for the appellant forcefully argued that the lower court did not ref er to the appellant's affidavit in reply that appears at pages 72 to 81 of the record of appeal. That this is contrary to the guidance of the Supreme Court in the case of Zambia National Commercial Bank Plc vs Chainama Hotel Ltd and Another5 for the proposition that it is the duty of the court to adjudicate J8 matters brought before it and a failure to do so is a misdirection and an abdication of the court's responsibility. 5. 9 The grievance in ground five stems from the delivery of a ruling on an application for security for costs based on the documents filed into court without securing the consent of the appellants contrary to the direction given in the case of Natural Valley Limited vs Zambia Revenue Authority6. Therefore, the court fell into error and we have been called upon to uphold the appeal. 6.0 Respondent's Arguments 6.1 The respondent's heads of arguments were filed on 14th November, 2023. The gist of the respondent's submission in relation to ground one was that the lower court considered the necessary principles of law applicable to an application for security for costs and correctly applied them to the case at hand. It was contended that she was therefore on firm ground when she dismissed the application for security for costs, and the case of Nkhata and 4 Others vs The Attorney-General7 called in aid by the appellant does not aid their case. 6 .2 The kernel of the arguments in ground two were that there is nothing untoward with the respondent and its Directors sharing the same premises as this is not a new or strange phenomenon. Learned Counsel further re buffed the assertion that the business premises and residence of the Directors were J9 abandoned. That these assertions were 1n any case not supported by material evidence to warrant favourable attention by this Court. 6.3 Pertaining to ground three, the respondent pointed out that they were up to date with returns at PACRA in that exhibit "RM6", which appears at pages 56 to 57 of the record of appeal, shows that annual returns were filed on 7 th January, 2022 and the shareholders' list was updated on 14th February, 2022. 6.4 Moving on to ground four, the crux of the respondent's arguments was that the appellants were accorded an opportunity to be heard in that their Advocate was present at the hearing that was h eld on 3 rd March, 2022, at 11.30 hours. It was therefore , stoutly averred that there is no substance in the allegations that the rules of natural justice were not applied by the lower court to this case. 6.5 In the fifth ground of appeal, the respondent's contention was that the High Court has discretion pursuant to Order 30 rule 6A ( 1) of the High Court Rules to determine a matter if satisfied that the application can be disposed of on the basis of documents before it without the attendance of the parties. It was spiritedly argued that this ground of appeal is therefore speculative and should equally fail . 6. 6 Based on the foregoing, learned Counsel for the respondent implored us to dismiss the appeal for lack of merit. JlO 7 .0 Hearing of the Appeal 7.1 At the hearing of the appeal on 16th November 2023, learned counsel for the respective parties namely; Ms. J. Mutemi for the appellant and Mrs. L. Mushota, placed reliance on the heads of argument that were filed and also made oral submissions to reinforce their respective cases. These arguments were a rehash of the written submissions canvassed herein and therefore we shall not reproduce them. 8.0 Decision of this Court 8.1 We have meticulously considered the record of appeal and the spirited arguments by the parties. At the core of the appeal is the question of what should be taken into consideration when a court is confronted with an application for security for costs. We shall address our minds on the law governing security for costs. 8 .2 We shall deal with each of the grounds of appeal seriatim although we do note that some of the grounds of appeal are entwined. 9.0 Ground 1 - Consideration of extraneous matters 9 .1 In the first ground of appeal, the appellant is greatly displeased with a portion of the ruling where the court remarked on the directors of the appellant being of foreign origin and of their intention to relocate to South Africa. According to the appellant, Jl 1 the Judge by so doing had delved into issues pertaining to stay of proceedings which was not the application before her. The argument by the appellant is that the application for security for costs was independent of any application that was before the court. We have thus been urged to reverse this portion of the ruling in line with the guidance given in the case of Nkhata & 4 Others vs The Attorney General7. 9.2 We are inclined to agree with the spirited arguments put forth by the appellants in that, the application that was before the court was for security for costs and not for stay of the proceedings. There appears to have been a mix-up in terms of the considerations for the application that was before the court below. To the extent that there were other considerations given on the application before the court, we set aside that portion of the ruling. 9 .3 Consequently, we find ground one to be meritorious and uphold it. 10.0 Ground 2 - Whether respondent operational and of fixed abode 10. 1 The unhappiness in the second ground stems from the holding by the court below that the respondent was operational and of fixed abode which according to the appellant is contrary to the evidence on record. Jl2 10.2 Having perused through the record in particular page 34 of ROA paragraph 1.8, the appellants posited that after conducting a diligent search they found that the respondent had stopped operating at its last known address. Further that the appellant had reasonable ground to believe that the respondent was no longer operating as a going concern and had changed its address with a view to evading the consequences of its litigation. 10.3 The respondent strongly refuted this assertion in its affidavit in opposition (see pages 38 to 42 ROA). The respondent denied the claims by the appellant that the registered address of the offices of its company had changed. In addition, that the appellant had not adduced proof of its claims as the respondent's address were adjacent to the deponent of the affidavit one Rose Sakala, the Managing Director of the Respondent. She asserted that the offices and residence both share the same physical address. 10 .4 It is plain from the fore going that regarding whether or not the respondent was still operational as a going concern, there was conflicting evidence by the parties. On the one hand, the appellant in their affidavit indicated that upon conducting a search at their premises they did not find any activity which led them to conclude that the premises had been abandoned. 10.5 On the other hand, the contention by the respondents is that this is not the correct position as they are still operational. Having looked at the ruling of the court below, it chose to believe J13 the respondent on the basis of the affidavit in opposition in contrast to the evidence of the appellant. She adverted to the case of Isaac Lungu vs Kali keka1 and on the basis of that authority came to the conclusion that: " .... I am of the considered view that the defendant's application for security for costs cannot succeed due to the fact that the plaintiff has shown in its affidavit in opposition that it is of fzxed abode, in Zambia and is a Zambian company." 10.6 The conflicting evidence notwithstanding, there is evidence on record that the respondent's Managing Director shares the same physical address as the respondent. This evidence was not refuted. This is evidenced by the Patents and Companies Registration Agency print outs appearing at pages 24, 42 and 52 of the record of appeal which also indicates the physical address. 10.7 The thrust of the arguments by the appellant is that the records at PACRA show that the annual returns were not up to date. However, thus does not take away from the facts on record that they were subsequently filed albeit later than they should have. Therefore, the Judge cannot faulted for relying on the said documentation. Jl4 10.8 It is our firm view that the Judge in the Court below was thus on firm ground in finding that the respondent was operational and of fixed abode. We therefore find no merit in the second ground and dismiss it. 11 .0 Ground 3 - Whether security for costs oppressive 11. 1 The grievance in the third ground arises from the holding by the court below that the application for security for costs was oppressive and intended to stifle a genuine claim. The appellant is unhappy with this assertion and has argued that a wrong analogy was used to buttress the position that the appellant was a large company seeking to shut down a small company. 11 .2 It has been argued that the court did not state how the said amount was oppressive and would resultantly stifle the appellant's claim. It has been argued that the amount of K300 ,000 was justified given the length of the litigation in this matter. 11.3 The bedrock of this appeal is the third ground because it leads us to interrogate when a court can award security for costs. An application for security for costs in the High Court is provided for in Order XL rule 7 of the High Court Rules 1 which enacts as follows: J15 "The Court or a Judge may, on the application of any defendant, if or he thinks fit, require any plaintiff in any suit, either at the commencement or any time during the p rogress thereof, to give security for costs to the satisfaction of the Court or a Judge, by deposit or othenuise, or to give further or better security, and may require any defendant to give security, or further or better security for the costs of any particular proceedings undertaken in his interest." 11.4 The question of security for costs was eloquently discussed in the case of Borniface K. Mwale vs Zambia Airways Corporation Ltd (In Liquidation)8 where it was held: "According to Rule 1 of Order 40 of the High Court Rules, costs are monies incurred in defending oneself or in proving one's case. Therefore, costs do not include the actual amount claimed. Security for costs is generally provided by the Plaintiff However, the proceedings in which the Def end ant can be ordered to provide security for costs are only those proceedings taken in his own interest. To hold othenuise would be a paradox since the defendant is forced to appear before Court to defend his rights." 11.5 In yet another illuminating case of Isaac Lungu vs Kalikeka1 it was observed by the Supreme Court that: "The court faced with an application for security will look into the prospects of success. But the Court will not be Jl6 enthusiastic about considering the merits of the claim unless it is possible to clearly demonstrate, one way or another, that there is a high degree of probability of success or failure." 11.6 They went on to state in relation to the aforecited case of Isaac Lungu vs Kalikeka1 that: "Further, the possibility or probability that the Appellant will be deterred from pursuing his appeal by an order for security for costs is a sufficient reason for not ordering security. We are aware that the burden to show that a security for costs would probably have the effect of stifling litigation is on the claimant and that the court ought to weigh the injustice to a claimant if prevented from pursuing a proper claim by an order for security with the possible injustice to the defendant if they could not recover their costs (see Keary Developments Ltd vs Tarmac Construction Ltd and Another). 11.7 We note that the appellant takes issue with the Judge having asserted that the appellant's application was intended to stifle the respondent's genuine claim. In the submissions Counsel alleged that this was not raised by the respondent. However at the hearing Ms. Mutemi conceded that paragraph 4.10 and 4.11 of the appellant's heads of arguments were misleading as J17 they indicated that the respondent did not refer to the appellant's trying to stifle a genuine claim. 11.8 Having perused the record of appeal in particular page 68 it is clear to us that the respondent did allude to the appellant seeking to throttle its claims. Therefore Ms. Mutemi had no option but to graciously concede on this aspect. 11. 9 From our perspective, the court below cannot be faulted because it had a duty to weigh the inju stice to the claimant and the possible injustice to the defendant as guided by the Isaac Lungu vs Kalikeka1 case. The quantum can be stifling and there is nothing untoward by a court looking at the justice of the case. 11 . 10 The aforecited cases of Born if ace Mwale5 and Isaac Lungu vs Kalikeka1 (supra) provide guidance on what considerations the court should take into account when confronted with an application for security for costs. It is plain to us that the court will look into, not only the prospects of success, but also that the costs should not have the effect of stifling the litigation. The court has to weigh the injustice to the claimant if they are prevented from pursuing a claim and also the possible injustice to the defendant if they are unable to recover costs. Jl8 11.11 In relation to when security for costs can be awarded it is also im perative to look at the provisions of Order 23 Rule 1 and Rule 2 of the Rules of the Supreme Court (1965) (White Book) 1999 edition which states that: "23 ( 1) Where, on the application of a def end ant to an action or other proceeding in the High Court, it appears to the Court - (a) that the plaintiff is ordinarily resident out of the jurisdiction, or (b) that the plaintiff (not being a plaintiff who is suing in a representative capacity) is a nominal plaintiff who is suing for the benefit of some other person and that there is reason to believe that he will be unable to pay the costs of the defendant if ordered to do so, or (c) subject to paragraph (2) that the plaintiffs address is not stated in the writ or other originating process or is incorrectly stated therein, or (d) that the plaintiff has changed his address during the course of the proceedings with a view to evading the consequences of the litigation, then if, having regard to all the circumstances of the case, the Court thinks it just to do so, it may order the plaintiff to give such security for the defendant's costs of the action or other proceeding as it thinks just. ., Jl9 (2) The Court shall not require a plaintiff to gwe security by reason only of paragraph (l)(c) if he satisfies the Court that the failure to state his address or the mis statement thereof was made innocently and without intention to deceive. 11 11. 12 The court in this regard has to be satisfied that the aforecited criteria has been met before an Order for security for costs can be granted. Turning to the case at hand, and having considered the criteria, it is clear to us that the appellant has failed to satisfy any one of the criteria set out in Order 23. This is on account of the fact that it has been found that the respondent has neither changed their registered address nor have they stopped operating from its last known address . 11.13 We take the view that the lower court was on firm ground in declining to grant the Order p rayed for. The use of her discretion cannot be faulted. We are further fortified 1n so stating by what the learned author of Zambian Civil Procedure: Commentary and Cases Volume 1 Dr. Patrick Matibini stated at page 520: "The Court has discretion to grant or refuse to grant a request for security for costs. This discretion is exercised with circumspection. In exercising this discretion1 the court will take into account the circumstances for each case and consider whether on the facts of each case it would be just J20 to grant the requested Order. The Rules of the Supreme Court provide that the court may order security for costs 'if having regard to all the circumstances of the case it is just to do so'. The preceding words have the effect of conferring upon the court a real discretion and indeed the court is bound to consider the circumstances of each case and in light of those circumstances, to determine whether and to what extent or for what amount a plaintiff (or a defendant) may be ordered to provide security for costs." 11.14 In light of the foregoing, we find no merit in the ground of appeal and accordingly dismiss it. 12.0 Ground 4 - Rules of the High Court & Natural Justice 12.1 In the 4 th ground, the displeasure with the court emanates from the non-consideration of the appellant's affidavit in reply and the lack of presence of the appellant's counsel during the hearing of the application for security of costs. 12.2 Additionally, that the court proceeded to render a ruling on an application for security for costs without determining the pending application before it. The contention is that the court failed and/ or neglected to adjudicate on all the issues raised by the appellant. 12. 3 In the view that we have taken in ground 4 , we find this ground to be otiose. ., J21 12 .4 The unhappiness in ground 5 is with the court having delivered a ruling in an application for security for costs based on the documents filed without the con sent of the appellant. This ground of appeal is hinged on Order XXX Rule 6(A) of the High Court Rules as amended by SI 58 of 2020 which provides as follows: "Where the court is satisfied that the application can be disposed of on the basis of documents before it, the court may determine the matter without the attendance of the parties and their advocates and shall issue a notice of delivery of the ruling." 12.5 To strengthen their arguments, reliance has been p laced on the case of Natural Valley Limited vs Zambia Revenue Authority6 where it was stated as follows: "Our understanding of Order XXX Rule 3 is that although a High Court Judge has discretion to dispose of an application in the absence of parties or their advocates on the basis of the documents before the court, the exercise of such discretion must be with the consent of the parties. In other words, a Judge must engage the parties prior to or on the date of hearing as to why in the court's opinion, a formal hearing and attendance of the parties or their advocates may be dispensed with due to the nature of the application. The basis of the Judge 's opinion must be sufficiently J22 highlighted so that the parties are satisfied that they will not be prejudiced if the Judge disposed of the application based on documents only. It is only after seeking the parties' consent that a Judge can safely dispose of an application on the basis of documents on record pursuant to Order XXX, rule 6(A)." 12.6 We are alive to the provisions of the aforecited Order XXX rule 6(A) of the High Court Rules as well as the Supreme Court decision in Natural Valley Limited vs ZRA 6 (supra) and we adopt the holding. In this regard, ideally, the consent of both parties should have been obtained, however, this was not done. That notwithstanding, it is our firm view that the Judge in the court below had sufficient material before her to enable her to proceed to render the ruling that she did. We do not therefore see any prejudice that could have been occasioned to the appellant despite them not consenting to the court proceeding to determine the application based on the documents that were before her. 12.7 This ground of appeal equally fails and is dismissed. 13.0 Conclusion 13.1 The appellant has succeeded nominally in ground 1. For the reasons advanced, the other grounds of appeal have been found to be unmeritorious and are dismissed. J23 13. 2 Each party shall bear their own costs. C' ·····················~ ~ ················ M. M. Kondolo, SC COURT OF APPEAL JUDGE ··· ···· ·~ ··············· B. M. Majula COURT OF APPEAL JUDGE ·············~~ ............... . Y. Chembe COURT OF APPEAL JUDGE