Finance Bank Zambia Limited v Africa Angle Limited and 2 Ors (SCZ Appeal No. 135 of 1997) [1998] ZMSC 116 (25 November 1998)

IN THE SUPREME COURT OF ZAMBIA HOLDEN AT LUSAKA (CIVIL JURISDICTION) BETWEEN: FINANCE BANK ZAMBIA LIMITED AND AFRICA ANGLE LIMITED IBRAHIM YUSUF SILDKY YVONNE PHOEBE JEDBURGH YUSUF SCZ APPEAL No.135 OF 1997 APPELLANT 1ST RESPONDENT 2ND RESPONDENT 389 RESPONDENT Coram: Challa, Chirwa and fttlzyamba, JJS 15th October 1998 and 25th November 1998 For the Appellant: A. Roberts, Legal Counsel For the Respondents: P. H. Yangailo, P. H. Yangailo and Company J U O G M E N T Muzyamba, J. S. delivered the judgment of the court. CASES REFERRED TO: 1. STANDARD CHARTERED BANK Vs WALKER 1982 3 ALLER 938 2. CUCKMERE BRICK COMPANY V MUTUAL FINANCE LTD 1971 1 CHO 949 3. JAMES DAKA V SHANTILAH BHULABHAI PATEL AND ZAMBIA STATE INSURANCE CORPORATION SCZ JUDGMENT No.19 OF 1995 4. WARNER V JACOB 20 CHO 220 For convenience we shall r•~fer to the appellant as plaintiff and to the 1st. 2nd and 3rd respondents as 1st, 2nd and 3rd defendants for that is what they were in the court below. This is an appeal against a High Court decision ordering revaluation of the mortgaged properties which have since been sold, an account to be rendered and a stay of execution. Briefly, the facts of this matter are that the second defendant is a Director of the first defendant. The first defendant obtained a loan of K368.660,075-00 for procurement of 11 brand new Toyota Hilux double c~bine vehicles. one brand new Mercedes Benz 5500 series and Two Nissan Mini buses. As a security for the repayment of the loan the 3rd defendant mortgaged his properties known as subdivisions 10 and 107 of farm number 396a Lusaka. The first defendant failed to repay the loan as agreed and the pl a inti ff took out originating summons for the repayment of the loan and interest. vacant possession and delivery of the mortgaged properties so I' J2 that it could exercise its power of sale under the mortgage deed. On 27th September 1995 the court approved a consent judgment filed by the parties. The judgment at pages 50 .. 51 of the record of appeal reads as follows: Upori hearing Counsel and by Consent of the parties hereunder signified: 1. IT IS HEREBY ADJUDGED THAT the plaintiff do recover from the Defendants the sum of five Hundred and Sixteen Thousand, Five Hundred and Four United States Dollars and Fifty Eight Cents (USS 516,504 .. 58} 2. IT IS HEREBY ORDERED that the full judgment debt be payable in the United States Dollar currency and should be settled in any event by the Defendants within three months from the date of this judgment. 3. IT IS FURTHER ORDERED that should there be a default by the Defendants for any reason in settling the full Judgment debt within three months from the date of this judgment, then the Plaintiff will be entitled forthwith to the relief of foreclosure and be at liberty to take possession or in the alternative exercise its power of sale of Subdivision Number 107 of Farm Number 396a Lusaka and Subdivision Number 10 of Farm Number 396a Lusaka respectively. 4. Costs of these proceedings will be borne by the Defendants. There then followed execution for possession and sale of the properties and a further execution for the balance of the judgment debt and an application by the defendants for setting aside of execution wrongly done and revaluation of the properties to determine their true market value and for an account to be rendered of the sales. learned trial Judge granted the The application and the plaintiff now appeals to this court. The appeal is on three grounds that the lower court erred by:- J3 1. Ordering a re-valuation of the two properties sold by the Appellant as Mortgagee pursuant to a Consent Judgment as such a re-valuation would not be true, fair or realistic because: (a) A valuation can never be retrospective and is not in the interest of justice. (b) Over one year had elapsed since the properties were sold and property market prices have since escalated in the country. (c) The properties have since been re-developed and improvements added thereon by their new owners. 2. Ordering a re-valuation of the properties as the prices obtained were the best or highest prices prevailing on the open market in that the Appellant owed a duty not only to the Mortgagor but also to itself to reduce the judgment debt as far as possible and that this the Appellant did by advertising the properties by public tender through estate agents and obtaining valuation reports; no evidence was adduced by the Respondents to prove otherwise. 3. Staying Execution and Setting aside the Writ of fieri Facias as no leave of Court for execution was required in the circumstances and as the Appellant had adequately accounted to the Respondents on the sale of the properties and the balance due on the Judgment debt.· Grounds 1 and 2 were argued as one. Before we consider the arguments we wish to draw the attention of Counsel for the appellant to rule 58 (2) of the supreme Court Rules, Cap 25 which provides: "The memorandum of appeal shall be substantially in Form CIV/3 of the Third Schedule and shall set forth concisely and under distinct heads, without argument or narrative, the grounds of objection to the judgment appealed against, and shall specify the points of law or fact which are alleged to have been wrongly decided. such grounds to be numbered consecutively." J4 Further, The memorandum of appeal in this case d:>es not comply with this rule in that it contains arguments. This practice must stop. We wi 11 now deal with the arguments on grounds 1 and 2. It was argued by Mr. Roberts that the order of re-valuation was not in the interests of justice because the properties were sold a year ago and improvements have been made to the that a valuation can never be retrospective. properties. Moreover that no evidence was adduced by the defendants that the properties were under valued or that the prices obtained were inadequate. On the tenders and contrary, valuation reports obtained, though there was no cbligation on the part of the plaintiff to obtain any valuation. That in the exercise of its duty as a mortgagee the best possible prices for the properties. On the duty of a mortgagee to obtain the best possible price he referred us to a number of cases. And Mr. Yangai 1 a' s argument was simply that the court ordered a re-valuation of the properties at the time of sale and that it has not been shown that it is impossible to get a valuation of the properties at the time of sale. Further that the cases the present case. cited by Mr. Roberts were distinguishable that the properties were advertised for sale. the plaintiff obtained from We will now consider the authorities cited. In Walker (1} it was held by Lord Denning that if a mortgagee enters into possession and realises a mortgaged property it is his duty to use reasonable care to obtain the best possible price which the circumstances of the case permit. In our view the best possible price must mean true open market value. In that case a receiver appointed by the mortgagee sold the assets o~ the mortgagor to meet the debt. The amount realised was not enough to payoff In Mutual Finance (2) a piece of land mortgaged for £50,000 the overdraft. and for which planning permission was obtained to erect 100 flats and subsequently another permission given to erect 35 houses was sold by the mortgagee through auctioneers for £44,000 because the auctioneers forgot in their advertisement to mention the planning permission for the erection of flats. The mortgagor claimed f.77 .ooo as value of the land. The learned trial Judge found the value of the land to be £65,000 and ordered accounts and inquiries to be made. On appeal it was held by Lord Bowen and Lord Fry that it was the duty of a mortgagee when realising the mortgaged property by sale to behave as though he was selling his own property so that the mortgagor may receive credit for the value. We respectfully agree with In James Oaka (3) the appellant mortgaged his property, their decision. stand No.4512 Northmeadt Lusaka to Zambia National Commercial Bank and respondent. Corporation, Zambia Insurance second State the JS When he fell in repayment arrears the property was sold to payoff both Initially the first respondent put up a tender which was less mortgages. than the amount of the two mortgages. His tender was accepted on condition that he increased the offer to payoff both mortgages. This he agreed and the mortgages were paid off for a total of K397,369-67. A year later the appellant obtained a valuation for K1,000,000 and argued that the property should have been sold for that amount. This court held, at page 6: "In this case, in order to prove that the price obtained for the property was in some way inadequate, it was not sufficient to produce a valuation report dated February 1989 in respect of property which was contracted to be sold in January 1988. As the learned trial Judge commented in his judgment, at the relevant period there were dramatic increases in the price of property and without evidence that in or about January 1988 the price realised was too law, the Appellant•s claim in this respect cannot be supported". That case. as Mr. Yan~Jailo rightly submitted is distinguishable from the present case in that the defendants in this case sought revaluation of the properties at the date of sale and the court so ordered. The order at page 8 of the record reads: 11As regards valuation by independent valuer. I also grant the defendants the order they seek in that regard. I do not understand the parts in the Judgments of the cases cited to me by Mr. Roberts mean that property can not be revalued. The fact that the properties have been sold is immateriJl. If the properties have not been demolished it is easy to trace its value at 1995 conditions. Of course only improvements made to the properties will be deducted. Before the plaintiff could account to the defendants and before corning to court it was unfair for the plaintiff to issue a writ of fifa against the defendants. The plaintiff was to recover his monies from the mortgaged property and the plaintiff had J6 to take all reasonable steps to see that he recovered his money from the properties. For instance. the plaintiff could have put the properties on rent first before selling the properties. The defendants reaction to the plaintiff 1 s action, I think is quite natural. They must be thinking that the plaintiff wants to economically ruin them. For the reasons I have given above I set aside the Writ of fifa pending the execution of the orders to account and to value the properties. 11 Moreover, in James Daka (3) the sale paid off the mortgages whereas in this case only an amount of K215.soo.ooo was realised and we do not understand how properties which were found to be sufficient securities for the loan of K368,660.075 at the tirne of borrowing in 1994 could cost less two years in the absence of evidence that market values had later especially so fallen over the years. Further we do not see the propriety of expressing a loan which was disbursed in kwacha into dollar in the Consent Judgment. This was certainly disadvantageous to the defendants. In Warner (4) the mortgagor brought an action against the mortgagee and purchaser of the mortgaged property to set aside the sale on the ground that the property was sold for less value. It was held that if a mortgagee exercises his power of sale bona file for the purpose of realising his debt and without collusion with the purchaser. the court will not interfer even though the sale be very disadvantageous, unless the price is so low as in itself to be evidence of fraud. ~e respectfully agree with this decision. However that case is distinguishable from this case in that the defendants are not seeking to set aside the sale but to establish the true market value of the properties at the time of sale. In the circumstances of this case we do not agree with Mr. Roberts that the order of the court below was not in the interests of justice. It certainly was. The appeal would therefore fail on these grounds- As regards ground 3, the learned trial Judge stayed execution and set aside the writ of execution for the balance of the 1udgment debt pending re-valuation of the properties and an account to be rendered of the sales. This ground is dependant upon the first ground and the first ground having failed this ground must also fail. We wish to add however that a " ,,. J7 Statutory power of sale under a mortgage deed 1s usually exercisable without recourse to court and where it is exercised by or through a court order then an account of the sale has to be made through the court by means of su11111ons for an account to be rendered. The appellant ought therefore to have taken out summons to render an account to the defendants of the sales before levying execution for the balance of the judgment debt. The learned trial Judge was therefore right in staying execution and setting aside the Fifa. For the foregoing reasons the appeal has failed on all the It is dismissed with costs to the defendants to be taxed in grounds. default of agreement. . .................. . S. M. CHAILA SUPREME COURT JUDGE ........••.....•••••. . D. K. CHIRWA SUPREME COURT JUDGE ...................... W. M. MUZVAMBA SUPREME COURT JUDGE