Charles Chihinga v New Future Financial Company Limited (2020/CCZ/003) [2021] ZMCC 23 (29 November 2021)

IN THE CONSTITUTIONAL COURT OF ZAMElfA HOLDEN AT LUSAKA 2020/CCZ/003 (Constitutional Jurisdictiori) XN THE MATTER: ARTICJL,E 1 §UB-ART!CLES ( 1 ), (2), AND (3) AND ARTICLE 2 SUB-ARTJ!CLES (a) AND (lo) IN THE MATTER OF: ,. -· ------ - .. IN THE MATTER OF: IN THE MATTER OF: AR. T!CLES CONSTITUTION OF ZAMBIA AND 9 OF THE NATIONAL (AMENDMENT) ACT NO. 2 OF 2016 ON THE AND EQUITY, ESPECIALLY PRINCIPLES AND l\1!0R. ALITY EQUALITY, SOCIAL CONSTITUTIONALISM AND . JUSTICE VALUES OF 118(2) THE ARTICLE CONSTITUTION ZAMBIA (AMENDMENT) ACT NO 2 OF 2016 ON THE PROTECTION AND PROMOTION OF NATIONAL VALUES PRJINCIJP'LES (F) OF 128(3) ARTICLES CONSTITUTION (AMENDMENT) ACT NO. 2 OF 2016 (C) OF THE ZAMBIA OF IN THE MATTER OF: SECTION 53 OF THE COMPETITION AND PROTECTION COMMliSl!ON ACT NO. 24 OF 2010 CONSUMER . . ------- ---- - . - - J l IN THE MATTER OF: SECTION 109, 116 AND l].8 OF THE ANJD JB:ANKING FliNANClfAL SER. VICES ACT NO. 7 OF 2017 THE JIN THE MATTER OF: 1511) OF THE MOI\TEY SECTION LENDERS ACT CHAPTER. 398 OF THE LAWS OF ZAMJBIA ][N THE MATTER OF; SECTION 65 OF THE LANDS ANJD DEEDS REGISTRY ACT CHAPTER 185 OF THE LAWS OF ZAMBIA IN THE MATTER OF: ARTICLES 7, 8, 10, 12 AND 17 OF THE UNIVERSAL lDECLAR. ATJ!:ON OF HUMAN RIGHTS OF 1984 IN THE MATTER. OF: XN THE MATTER OF: RESER. Vl!NG THE ENDEIVHC BUSINESS PRACTICE OF TO LENDERS THEMSELVES THE RIGHT TO SEJLL PROPERTY THE WITHOUT RECOURSE TO THE CO. UR. TS OF LAW BORR. O'IJJER.'S RESPONDENT'S BUSINESS THE PRACTICE OF CONCEALING SIGNED FR. OM THE LOAN AGREEMENTS BORROWER. IN LIGHT OF ZAMBIA'S VALUES AND EQUITY, MORALITY AND HUMAN DIGNITY J2 J[N THE MATTER. OF: IN THE MATTER OF: (A NEW FUTURE COMlFANY LIIVirnTED MONEY COMPANY) LENDING UN. JUSTLY USl!NG A CONTRACT OF SALE AGREElVi!ENT JIN A MONEY TO LENDING ABROGATE THE LAW TRANSACTION NEW FUTURE FINANCIAL COMPANY LIMITED CHARGING UNCONSCIONABLE INTEREST RATES AND ILJL,EGAL PENALTIES IN A MONEY LENDING TRANSACTION BETWEEN: CHARLES CHIHINGA PETITIONER. AND NEW FUTURE FINANCJLAJL, COMPANY LIMITED RESPONDENT Coram: SITA. LI, J. V1ULONDA AND MUSA. LUKE, JJC. On 21 st July,. 2021 and 29 th November, 2021. For the Petitioner: Mr. P. Chuuh.x of Messrs. Kalokoni and Company J3 Mr,;\ K. Mwalle of Messrrs. K. Mwale armtrl! Company JUDGMENT MUSAJLUKE, JC delivered the Judgment of the Court. Cases :referred to: 1. Barkhuizen v Napier (2007) (7) BCLR 691 (CC). 2. John Marley v Johanna Lambrechts Case No. A 526/2013. 3. Douglas Gilmore, Executor (Estate of Bess Gilmore) v Pawn King, INC, et al No 1848. 4. Colgate Palmolive (Z) Inc. v Abel Shemu Chuka and Others SCZ Appeal No 181 of 2005. 5. Law Association of Zambia and Chapter One Foundation Ltd v Attorney General 2019 /CCZ/0013/ 14. Legislation referred to: 1. The Constitution of Zambia, Chapter 1 of the Laws of Zambia. 2. The Competition and Consumer Protection Commission Act No. 24 of 2010. 3. The Banking and Financial Services Act No. 7 of 2017. 4. The Money - Lenders Act Chapter 398 of the laws of Zambia. 5. The Lands and Deeds Registry Act Chapter 185 of the Laws of Zambia. J4 Oll:lh!el!' woll'ks :refen:edl to: 1. The United Nations Universal Declaration of Huma..ri Rights Charter - 1948. 2. Chitty on Contracts, Volume 1, 29 th Edition 2004, Sweet and Maxwell, London. f 1] INTRODUCTION [ 1.1] This Judgment 1s 1n relation to the petition filed by the Petitioner pursuant to the provisions of Articles 1,2,3,8,9, 118 (2) (f) and 128(3) of the Constitution of Zambia as amended by the Constitution of Zambia (Amendment) Act No, 2 of 2016 (herein after referred to as the Constitution), section 53 of the Competition and Consumer Protection Commission Act No. 24 of 2010 (the CCP Act), Sections 109, 116 and 118 of the Banking and Financial Services Act No. 7 of 2017 (BFS Act), Section 15 of the Money Lenders Act Chapter 398 of the Laws of Zambia, Sections 65 of the Lands and Deeds Registry Act Chapter 185 of the Laws of Zambia as well as Articles 7,8, 10, 12 and 17 of the United Nations Universal Declaration of Human Rights of 1948. JS [2] JP'ETliTJIONER.'S CASE [2.1] On 10th March, 2020 the Petitioner lodged a petition before this Court, alleging breach or likely breach of various provisions of the Constitution by the Respondent. Further, the Petitioner invites this Court to protect and promote the values and principles as espoused under Article 8 of the Constitution arising out of the Respondent's practice of concealing loan agreements, charging unconscionable interests and reserving the right to change title of a mortgaged property without recourse to the courts. [2.2] The Petitioner alleges that sometime in 2019, the Respondent, a financial institution owned and managed by Chinese nationals, duly incorporated in Zambia and engaged in the business of Money Lending, advertised to the Zambian public that they were lending out money for the purchase of cars and land and to assist its clients to repay bank loans. [2.3] The Petitioner has averred that on 24 th April, 2019 he approached the Respondent for a loan to purchase a farm in Chibombo District of the Republic of Zambia to which the J6 Respondent agreed to disburse to the Petitioner a loan worth United States Dollars Thirty Thousand (US$ 30,000) payable within a period of six (6) months. • [2.4] The parties further agreed that ·before the said loan amount could be disbursed, a loan agreement would be executed between the parties, outlining the terms and conditions that would govern their relationship. [2.5] It was averred that when the Petitioner and the Respondent finalized the loan agreement which included execution of a contract of. sale for the sale of the Petitioner's matrimonial property to the Respondent in case of default in repaying the loan. That the salient provisions of the said contract of sale contained the following special conditions: i. That the vendor was selling the property to the buyer (the Respondent) ii. That the Petitioner was loaned the sum of US$ 60,000.00 to be repaid within six (06) months iii. The vendor (the Petitioner) would be free to buy back the property within six (06) months at the total cost of US$ 60,000 failing which the property would pass on to the purchaser. iv. 15% of the total conbact amount as damages for breach of contract and; J7 v. 3% of the lP'1.uchaseir's staff as lost cost of wo,ki.ng time. [2.6] The Petitioner alleges that he was made to sign what purported to be a loan agreement but was neither allowed to read its contents nor availed a copy thereof. [2. 7] The Petitioner has charged that the pre-sale contract relating to his family property No. 5818, Lusaka is a sham intended to deprive him of his right to property. Further that charging of interest at 100% over a period of six (06) months is unconscionable, an unfair contract term and unenforceable at law. [2.8] It was alleged that the property that secured the loan amount of US$ 30,000.00 is worth over K 7,000,000.00 (Seven Million Kwacha) at its current market value and that the Respondent only disbursed to the Petitioner a sum of US$ 30,000.00 and not the US$ 60,000.00 being demanded. That the Respondent is threatening to sell the Petitioner's property to recover a sum of US$ 60,000.00 which it did not disburse to the Petitioner. The Petitioner stated that he intends to settle the sum of US$ JS 30,000.00 upon the removing the unconscionable interest and the penalties charged by the Respondent. [2.9] The Petitioner stated that the Respondent took advantage of his despe1·ate situation by dishonestly devising a scheme to deprive him of his most valued asset and that the Respondent's actions fly in the teeth of the national values, and principles of morality, ethics, equity and social justice as enshrined in the Constitution. Further that section 65 of the Lands and Deeds Registry Act provides that a mortgage shall act as security and not a transfer or lease of land. [2.10] The Petitioner therefore prays for: (i) A declaration that the Respondent's claim for US$ 60,000.00 which they did not advance to the Petitioner is a clear violation of the national values and principles namely morality, equity, constitutionalism, human dignity and social justice as enshrined in the Constitution. (ii) A declaratory order that the charging of interest of 100% on the advanced US$ 30,000 over a period of six (06) months violates the Money Lenders Act and also the Republican Constitution for being immoral, unethical and unjust contrary to our national values and principles as enshrined in the Constitution. J9 (iii) A declar.ator.y order that the charging ofi.nterest of 100% on the advanced US$ 30,000.00 over a period of six (06) months is unenforceable for breach of the Money Lender's Act which caps interest at 48% per annum and also violates the national values and principles o:r moirality, ethics, equH:y and social justice as enshrined in the Constitution. (iv) A declaration that the charging of penalties by the Respondent on the Petitioner is illegal for contravening tthe Banking and Financial Services Act No. 7 of 2017 and the common law on penalties and also violates the national values and principles of morality, ethics, equity and social justice as enshrined in the Constitution. (v) A declaration that the pmrported contract of sale agreement and a Deed Assignment is null and void for contravening section 65 of the Lands and Deeds Registry Act Chapter 185 of the Laws of Zambia and also for being a sham. (vi) An Order of restitution restoring Plot No. 5818 Lunsemfwa Road, Kalundu, Lusaka back to the Petitioner. (vii) An Order of intell'im injunction restraining the Respondent, their employees, servants, agents or whosoever from transferring their Plot No. 5818 Lunse1nfwa Road, Kalundu, Lusaka into their names, trespassing on, interfering with, nor evicting the Petitioner from the subject property until th.e conclusion of the matter. (viii) An order for the reconciliation of the account upon removal of unconscionable interest and penalties. JlO (ix) Costs. [2.11 J The petition was accompanied by an affidavit which restated the facts in the petition. The Petitioner also filed skeleton arguments in support of the petition. [2.12) In the skeleton arguments in support of the petition, the Petitioner argued that the Respondent has violated the Constitution by offending the values and principles enshrined under Article 8 of the Constitution, hence invoking the jurisdiction of this Court. It was argued that this Court has the mandate under Article 118 (2) (f) of the Constitution to protect and promote the values and principles set therein. [2.13) We were called upon to examine what the Petitioner termed as 'Usurious' acts and/practices of making unethical or immoral monetary loans that unfairly enrich the lender. In addressing the alleged usurious acts of the Respondent, three (3) legal issues were identified for our determination according to the Petitioner as follows: Jll 1. Whether or not the purported sale was a mortgage but masked as a sale? u. Whether or not the purported sale offends public policy? 111. Whether or not the purported sale offends financial regulations? [2.14] As regards the 1st issue on whether or not the purported sale of the Petitioner's house was a mortgage masked as a sale, it was the Petitioner's submission that the initial transaction between him and the Respondent was a mortgage agreement but masked as a sale to avoid usury laws such as the Financial Services (Cost of Borrowing) Regulations and section 65 of the Lands and Deeds Registry Act Chapter 185 of the Laws of Zambia. [2.15] Various Regional and International decisions were cited 1n which the courts have allegedly held that a purchase agreement should not be taken as it is but should be scrutinized to determine whether or not it is an ordinary loan, the determining factor being the difference between the market value of the Jl2 • property and the purported selling pnce and that when the difference is huge, then it's more likely to be a mortgage. [2.16] Premised on those authorities, it was submitted that this Court should find that the purported sale was simply a fa9ade to hide the loan between the parties, as the difference between the market value of the property and the purported selling price was too huge for the transaction to be a sale. The selling price having been capped at 10% of the original market price. [2.17] The second legal issue raised was whether or not the purported sale offends public policy. It was submitted that should this Court find that the purported contract of sale was a fa9ade to avoid usury laws, then the Court should come to the inescapable conclusion that the said contract offends the values and principles as enshrined in the Constitution being: Morality and ethics, constitutionalism, equity, social justice and equality and integrity. This is premised on the fact that the purported contract was made to unjustly enrich the Respondent from the default of the Petitioner. Jl3 ' l . • [2.18] The Petitioner cited cases to advance an argument that courts may decline to enforce contractual terms that are in conflict with constitutional values even though the parties have consented to them. It was argued that in the South African case of Ba!!:khuizen v Na.pier 1 it was held that a term in the contract that is inimical to the values enshrined in the constitution is contrary to public policy and is therefore unenforceable. Further, that in another South African case of John Marley v Johanna Lambrechts 2 it was held that the sale agreement was void for offending public policy as the lender attempted to enrich himself from the borrower's default. [2.19] With regard to the final issue on whether or not the purported sale offends financial regulations, it was submitted that the Financial Regulations as contained in the Financial Services (Cost of Borrowing) Regulations of 1995 and section 65 of the Lands and Deeds Registry Act provide that interest is to be charged per year and that the lender shall use the formulae stipulated in the said Regulations. Reliance was particularly placed on regulations 4, 7 and 10 of the Financial Services (Cost Jl4 of Borrowing) Regulations. It was further argued that section 65 of the Lands and Deeds Registry Act clearly provides that a mortgage shall not be treated as a sale. [2.20) It was therefore submitted that the mortgage arrangement which was masked as a sale by the Respondent did not conform to the dictates of the Financial Services (Cost of Borrowing) Regulations and the Lands and Deeds Registry Act. [2.21) The Petitioner also called to his aid the case of Douglas Gilmore, Executol." (Estate of Bess Gilmore) v Fawn King, INC, et al3 in which the Supreme Court of Connecticut emphasized the need for parties to act in good faith. In that case, it was held allegedly inter alia that: When a contract appears as a sale but is in fact a mere cloak for a usurious loan, it will not be free from the taint of usury: in Kjar v Brimley 27 Utah 2d 411, 416, 497 P2d23 (1972) it was held that casting a loan transaction in the form of a sale with an option to repurchase will not insulate the transaction from the usury laws ...... [2.22] The Petitioner thus submitted that the loan given to him by the Respondent but masked as a sale be deemed to have violated J15 the usury laws and prayed that this Court grants the reliefs sought and that costs be for the Petitioner. [3] RESPONDENT'S CASE [3.1] On 18th April, 2021 the Respondent filed its answer to the petition in which it disputed assertions that it issued a loan to the Petitioner. [3.2] That contrary to the Petitioner's assertions, the Respondent averred that the parties herein executed a contract of sale, for the purchase of land and that the Respondent paid to the Petitioner a sum of US$ 60,000.00 and not US$ 30,000.00 as alleged by the Petitioner, in respect of the said transaction. That as the parties did not execute any loan agreement under the Financial Services Act, they are not bound by the provisions of the Money Lenders Act. [3.3] The Respondent thus stated that it was within its legal right to sell the property in question as the sai-ne was sold to it by the Petitioner. Jl6 [3.4] The Respondent's answer was supported by an affidavit and skeleton arguments in opposition to the petition. The thrust of these arguments was on the sanctity of the doctrine of freedom to contract and upholding commercial bargains. In this regard, recourse was had to various authorities on the subject. The case of Colgate PalmoHve (Z) Xnc. v Abel Shemu Chuka and Othel."s4 was particularly cited, in which the Supreme Court of Zambia inter alia held as follows: If there is one thing more than another which public policy requires, is that all men of full age and competent understanding shall have the utmost liberty of contracting and that their contracts, when entered into freely and voluntarily shall be held. sacred and. shall be enforced by courts of justice. [3.5] It was further argued that the learned authors of Chitty on Contracts at pages 707 -708 have stated that: Where the agreement of the parties has been reduced into writing and! the document containing the agreement has been signed by one 01c both of them, it is well established that the party signing willl ordinarily be bound by the terms of the written agreement whether or not he has iread them. Jl7 [3.6] It was argued that the doctrine of freedom of contract has always been respected by the law, as it allows parties to provide for the terms and conditions that will govern the relationship. That the doctrine operates on the principle that every man is the master of the contract he may choose to make; and it is of the highest importance that every contract should be construed according to the intention of the contracting parties. (3. 7] It was argued that the principle of sanctity of contract has a double emphasis. Firstly, that if parties must be held to their bargains, they should be treated as masters of their own bargains, and that the courts should not indulge in ad hoc adjustment of terms which strike them as unreasonable or imprudent. Secondly, that if parties must be held to bargains, then the courts should not lightly relieve parties from performance of their agreements [3.8] Applying these principles to the case before us, it was the Respondent's position that the terms of the contract were not only express but also particular and specific with regard to the nature of the agreement itself. That the accepted good practice Jl8 of the law is that the Petitioner is bound by the said terms of the contract he signed. [3.9] It was argued further that the agreement between the parties was reduced into writing and the document containing the agreement signed by the parties. That it is well established that the party signing will ordinarily be bound by the terms of the written agreement whether or not he has read it. [3.1 O] The Respondent concluded by urging us to find in favour of the Respondent by striking out the Petitioner's petition, stating that the parties freely entered into a contract and therefore are bound by the terms of the said contract. Further, that costs be for the Respondent. [4] ANALYSJ[S AND DECJ[SJ!ON [4.1] We have carefully considered the petition before us, the Respondent's answer, and the accompanying affidavits both for and against the petition as well as the skeleton arguments filed by respective counsel. J19 [4.2] The Petitioner herein moved this Court purportedly pursuant to Articles 1 (1)(2) and (3), 2 (a) and (b), 8, 9, 118(2) (f) and 128(3) (c) of the Constitution. [4.3] Article 128(1) of the Constitution sets out the jurisdiction of this Court and provides as follows: Subject to Article 28, the Constitutional Court has original and final jurisdiction to hear- (a) a matter relating to the interpretation of the Constitution; (b) a matter relating to a violation or contravention of this Constitution (c) a matter relating to the President, Vice President or election of a President; (d) appeals relating to the electio·n of a Member of Parliament and councilors; and (e) whether or not a matter falls within the jurisdiction of the Constitutional Court. [4.4] Article 128(3) further provides as follows: Subject to Article 28, a person who alleges that (a) an Act of Padiament or statutory instrument; (b) an action, measure or decision taken under law; or (c) an act, omission, measure or decision by a person or an authority; contravenes this Constitution, may petition the Constitutional Court for redress. J20 [4.5] This Court thus enjoys exclusive jurisdiction over constitutional matters as per the provisions of Article 128 subject to Article 28 of the Constitution. In the case of the Law Association of Zambia and. Chaptell' One Foundation Ltd v The Attorney General5 we stated that the jurisdiction of this Court though extensive, is still limited by the Constitution itself in Article 128 which is subject to Article 28. [ 4. 6] In casu, the Petitioner has invoked the jurisdiction of this Court alleging that the Respondent has violated the Constitution by offending the values and principles as enshrined under Article 8 of the Constitution. The Petitioner has argued that this Court has a mandate under Article 118(2) (f) of the Constitution to protect and promote the values and principles enshrined in the Constitution. Article 118(2) (f) of the Constitution provides as follows: In exercising judicial authority, the courts shall be guided by the following principles: (f) the values and principles of this Constitution shall be protected and promoted. [4.7] Looking at the facts, arguments of the parties and the law, the question that falls for our determination is: J21 . ' I I ,U Whether Oll' mi.ot the actiomi. herein raises any c@nstitVJtional issue to wall'll'a,-it the invocatiioim of the jull'isdiction of this Couirt, as JP>li·ovided foll" undell' Article 128 of the Coimstitution. [4.8] The factual background to the case is that according to the Petitioner, the Respondent advanced him the sum of US$ 30,000.00 for which loan he gave his house, the subject of the dispute as collateral. [4.9] The Petitioner alleged that the Respondent took advantage of the Petitioner's desperate situation by devising a scheme to deprive him of his most valued asset which action flies in the teeth of this country's national values and principles of morality, ethics, equity and social justice as enshrined in the Constitution and that this Court is clothed with the requisite jurisdiction to promote and protect the national values and principles. The Respondent on its part alleges that it purchased the subject property at the price of US$ 60,000.00. The Petitioner denies the allegation. [4.10] Articles 8 and 9 of the Constitution, lists the national values and principles and their application as follows: J22 If r I W 8. The National values and principles are- a. mo.ality and ethics; b. patriotism and nati.onall uni.1:y; c. democracy and constitutionalism; d. human cl.ignity, equity, social justice, equality and non discrimination; e. good governance and integrity; and f. sustainable development. 9 (1) The national values and principles shall apply to the- a. interpretation of this Constitution; b. enactment and interpretation of the law; and c. development and implementation of State Policy. [4.11 J A plain reading of Article 9 of the Constitution shows that the values and principles are to be applied in the interpretation of the Constitution, the enactment and interpretation of laws and they also act as a guide to developing and implementing State policy. The national values and principles are not only symbolic but also influence the aspirations of society in the interpretation and application of the law and are meant to guide public officers and policy makers. [4.12] It follows that the national values and principles as provided for under Article 8 of the Constitution must be taken into account when this Court 1s interpreting the Constitution. In fact the J23 Constitution itself has reinforced this theory of interpretation of the Constitution by providing under Article 267(1) as follows: This Constitution shall be interpreted in accordance with tine Bill of Rights and in a manner that- (a) (b) (c) promotes its purposes, values and principles; permits the development of the law; and contributes to good governance. [4.13] It is therefore our considered view that when a matter is brought before us for determination, we are obligated to take into account the national values and principles when interpreting the Constitution. The national values and principles by themselves are not justiciable. A litigant that comes to this Court must cite a provision of the Constitution that needs interpretation or which has allegedly been breached. It is only during the interpretation process that the Court is called upon to do so in is such manner that will promote the Constitution's purposes, values and principles. The values and principles are also to be considered in the development and implementation of State policy. J24 [4.14] The Petitioner has not cited any constitutional provision that needs interpretation by this Court to which we should apply the provisions of Article 8 and 9 of the Constitution. [4.15] From the reliefs sought by the Petitioner, apart from alleging breach of the national values and principles which we have addressed, the Petitioner has also alleged breach of various pieces of legislation such as the Money Lenders Act, the Banking and Financial Services Act and the Lands and Deeds Registry Act whose interpretation is a preserve mainly of the High Court at first instance. [4.16] As we have earlier discussed in this judgment, the jurisdiction of this Court is very specific as clothed by Article 128 of the Constitution. This does not include resolving contractual breaches between individuals or the interpretation of various pieces of legislation. [4.17] This Court cannot be invited to interrogate alleged violations of other pieces of the law, unless it is alleged that those pieces of legislation contravene the Constitution, which is not the case in the present case. This is therefore, not a proper case in which J25 we can invoke the prov1s1ons of Articles 8 and 9 of the Constitution. More so that the issues surrounding the dispute between the Petitioner a.11.d the Respondent arise from a contractual agreement entered into by the parties with no constitutional question fit to be interrogated by this Court. [5] CONCLUSION [5.1] We find that the petition herein is improperly before this Court as it raises non constitutional questions warranting invocation of this Court's jurisdiction. Consequently, the petition is forthwith dismissed for want of jurisdiction. [5.2] We order that each party will bear own costs. A. M. SKTALI i)fi~r(1 ;I n I i "I ' ' I -----+-~~riF-• - - - iv i I CONSTITUTIONAL COURT JUD(\G fi P , A Iv v( , . . J \ P. MULONDA M. MUSAL9KE CONSTITUTIONAL COURT JUDGE CONSTITUTIONAU COURT JUDGE \ J26