Gerald Kachali v Cotton Association of Zambia & ors (2024 /IRCLK/ 608 / 2020) [2024] ZMHC 233 (9 October 2024)

IN THE HIGH COURT FOR ZAMBIA 2024 /IRCLK/ 608 / 2020 AT THE PRINCIPAL REGISTRY INDUSTRIAL RELATIONS DIVISION HOLDEN AT LUSAKA BETWEEN: GERALD KACHALI AND COMPLAINANT COTTON ASSOCIATION OF ZAMBIA 1 S T RESPONDENT MUMBWA FARMERS AND PRESSING 2ND RESPONDENT COMPANY LIMITED CITIZENS ECONOMIC EMPOWERMENT CLAIMANT COMMISSION Coram : Chiga li Mikalile, J this 9 t h day of October, 2024 For the Compla inan t: Mr. L. C. Banda & Mr. E. Kasonso - Messrs Iven Levi Legal Practitioners For the Respondents: No appear ance For the Cla imant : Ms. B. Ngandu - In House Counsel • Legislation referred to 1. The Sheriffs Act Chapter 37 the of Laws of Zambia 2. Order 17 rule 1 (b) of the Rules of the Supreme Court of England, 1999 Edition. Cases referred to: 1. African Banking Corporation Zambia v Mubende Country Lodge Limited SC2 Appeal No.116 /201 6 2. Betty Chizyuka a nd Others v. Finance Bank Zambia Limited, CAZ Appeal No 137/2019 3. Mulenga v. Serioes (1998 Limited) and Others, Appeal No. 52A/2009 4. Levy v. Abercorris Slate & Slab co (1882) CH260 a t 264. 5. Illingworth v. Houldsworth (1904) AC 365 6. Re Yorkshire Woolcombers Association Ltd (1903)2 CHD 284. 7 . Government Stock and Securities Inves tm ent Co v. Ma nila Railway Co (1897) AC 8. Nyampala Safaris Zambia Limited and Others v. Zambia Wildlife Authority anc Others, SCZ 6 of 2004 9. Eagle Charalambous Transport Limited v. Percy Mulenga & Other No. 80/ 201: CA 10. Richard v. J enkins (1887) 18 Q. B. D 4 55 11. Zlatan Zlatko Arnautovic v. S tanbic Ba nk a nd Attorney General (2007) No 56/2007 12. Mpande Nchimunya v. Stephen Hibwa ni Mich ela, SCZ Judgmen t No. 12 / 1997 13. Tap Zambia Limited v. Percy Limbusha and Eight Others (20 17) 3 ZR 9 R2 • Introduction 1. This is a ruling to determine the interpleader summons filed by the Sheriff of Zambia and the notice of claim to goods taken in execution. 2. The background to this ruling is that the complainant, Gerald Kachali, commenced action against the respondents by Notice of Complaint on 25th September, 2020. In a judgment delivered on 3 rd November, 2023, Justice T. S. Musonda found in favour of the complainant. After a subsequent judgment on assessment dated 28 th December, 2023, the complainant caused a writ of .fieri Jacias to be issued on 16th January 2024 to satisfy the payment of the sum of K 252, 370.16. 3. Prior to this action, the respondents had entered into a loan facility agreement with the claimant dated 1st June , 20 16 which was made pu rsuant to an Asset Protection Agreement dated 24th May 2016. 4. In executing its duties, the sheriff, backed by the writ of .fieri Jacias, seized the respondents' weighbridge and forklift. The claimant reacted by issuing a notice of claim to goods on 6 th June, 2024 which notice was opposed by the complainant. The forgoing culminated in the sheriff issuing interpleader summons to determine the ownership of the good seized, h ence this ruling. R3 Interpleader summons 5. The interpleader summons was issued on 20th June, 2024 supported by an affidavit of even date deposed to by Davies Joseph Phiri, the Assistant Sheriff - Southern Region. Briefly, he deposed that he executed the writ of fieri facias (which he exhibited as "DJPl") against the respondents for the recovery of the sum of K 252,370.16. He seized a weigh bridge and the fork lift by way of walking possession as per seizure form "DJP2". 6. The sheriff could not proceed with the sale of the seized goods because of the notice of claim by the claimant. He entreated the Court to determine the legal owner of the seized weigh bridge and fork lift. He further asked the Court to make an order as to who will pay the commission and costs incurred. 7. The skeleton arguments supporting the application reveal that the application is made pursuant to Order 43(1) (b) of the High Court Rules (though not applicable to this division) and Order 17(1) (b) of the Rules of the Supreme Court of England. Further reliance was placed on the cases of African Banking Corporat ion Zam bia v. Mubende Country Lodge Limitedl1l and Betty Chizyuka and Others v. Finance Bank Zambia Limited!2l 8. Based on thes e authorities, it was submitted that this Court has power to determine the ownership of the goods or chattels taken in execution by the sheriff and are subject of adverse claims. R4 Notice of claim 9. The affidavit in support of the notice of claim to goods taken in execution was deposed to by Anthony Moonga, the claimant's Credit Manager. The affidavit discloses that the claimant is a creditor of the respondents through a business loan that was secured by an Asset Protection Agreement fencing off all assets procured by the Commission for the respondents by creation and registration of a Debenture at PACRA of a fixed and floating charge dated 3 rd September, 2015 to secure a sum of K 1,000,000.00. It is as a result of this that the claimant claims interest in the properties seized by the sheriff. 10. Mr. Moonga exhibited the Asset Protection Agreement, loan facility and the PACRA print out as exhibits "AM2 to AM4". The kernel of his affidavit was that the seizure of the goods and the eventual possible sale will be detrimental to the claimant as secured creditors. 11. In rebuttal, the complainant filed an affidavit in opposition on 25 th June 2024. He deposed that by virtue of exhibit "AM4" , the claimant herein is a shareholder of 4,480 shares in the defendant companies and not a creditor as asserted. According to the complainant, he personally signed the Asset Protection Agreement as a witness in his capacity as Operations Manager. He averred that the purpose of the loan agreement was to purchase cotton seed for the 2015/2016 season and not to RS purchase the weigh bridge and folk lift. He underscored that the security for the said loan was only covering existing goods for the defendants in 2016 and not future purchases in 201 7 such as the weigh bridge and the forklift which were purchased through a grant from SAPP and not from the funds of the loan agreement. 12. The affidavit discloses that although the claimant is claiming interest in the seized goods through debenture registration as security, the claimant had neglected/failed to exhibit any debenture registration deed. There was also no evidence that the floating charge had now crystallized. 13. The affidavit further reveals that the defendant's asset r egistry for the year 20 1 7 and 2018 clearly shows that the seized goods belong to the d efendants as indicated in the exhibit marked "GKl ". The complainant's main contention is that the seizure of the goods and the eventual sale will not in any way be detrimental to the claimant as secured creditors as the claimant herein is a major shareholder and not a creditor. Skeleton arguments 14. Counsel for the clain1ant highlighted that the claim is made pursuant to Order 17 (2) of the White Book which provides that: Any person making a claim to or in respect of any money, goods or chattels taken or intended to be taken in execution under process of the Court, or to the proceeds or value of any such goods or chattels, must R6 giue notice of his claim to the s heriff charged with the execution of the process ... 15. It was reiterated th at the claimant is a creditor of the d efendants through the loan facility of K 1,000,000.00. The properties seized are secured by a debenture and that the claimant has registered title of all p r op erties. Consequently, the claimant ought to be granted possession of the fork lift and the weighbridge . To fortify this argument, reliance was p laced on the case of Mulenga v. Serioes ( 1998 Limited) and Others!3l in which the Supreme Court found that the claimants had valid claims to the properties in issue. 16. In the skeleton arguments opposing the notice of claim, counsel for the complainant submitted that a debenture was a document acknowledging a deb t and cited the case of Levy v . Abercorris Slate & Slab Co!4l in aid. He then submitted that the claimant h a d not produced any document evidencing or acknowledging debt in form of a debenture . 17. It was submitted that a floating charge is a charge or security which is not put into immediate operation but floats and the company continues to operate. This is until an event occurs or some act is done which causes it to settle and fasten on the subject of the charge within its reach or grasp. To reinforce the this argument, the complainant relied on the cases of Illingworth R7 v. Houldsworth(5l and Re Yorkshire Woolcombers Association Ltd(6l. 18. Counsel for the complainant then went on to highlight the circumstances when a floating charge becomes fixed. These include: when a company ceases its business; when a company is wound up; where a receiver is appointed and; if some event happens upon which the charged is to become a fixed charge and if notice is given to that effect in terms of the charge. None of these are applicable herein. 19. It was contended that the claimant had failed to demonstrate how the seized goods are registered as security for obtaining a loan in 2016. Meanwhile, there is no information showing that the floating charge is now a fixed charge without which the claimant cannot claim an interest in the goods. The case of Government St ock and Se c uritie s Investment Co v. Manila Railway Co(7) was cited which explained the effect of a crystalised charge. Counsel pressed that the seized goods were bought in 2017 by SAPP funds way after the loan agreement was entered into. 20. The arguments then addressed the claimant's status 1n relation to the respondents. Counsel's argument was that the claimant is a shareholder with 4,480 shares in the respondents. It is in this capacity that the claimant is indirectly protecting its interest in the seized good and not as a creditor. The claimant, it R8 was argued, has no interest in the seized goods despite putting up untrue stories of a denture which it has failed to prove. 21. The additional argument on behalf of the complainant was regarding locus standi. It was con tended that as a shareholder, the claimant has conflicting interest and as such has no locus standi to claim the seized goods. He stressed that it will not be in the interest of justice to allow them claim their own seized goods , unless they offer to liquidate the judgment sum in monthly installments. 22 . On the circumstances when the Court should grant a stay, counsel relied on the case of Nyampala Safaris Zambia Limited and Others v. Zambia Wildlife Authority and Oth ers(8l which highlights that a stay of execution is granted on good and convincing reasons and that a successful litigant should not be deprived of the fruits of litigation as a matter of course. 23. In view of the forgoing, counsel implored Court not to entertain the claimant's application and dismiss it with courts as it has no merit. Hearing 24. The hearing was attended by counsel for the complainant Mr. Banda together with Mr. Kasonso and in-house counsel for the claimant Ms. Ngandu. Counsel relied on the documents filed on record. R 9 25. Ms. Ngandu ernphasised that the costs of the execution should be borne by the complainant. Sh e relied on the case of African Banking Corporation v. Mubende Country Lodge11l which highlights the essence of interpleader summons and also relied on s ection 14(2) of the Sheriffs Act. 26. Mr. Banda on behalf of the complainant echoed the arguments encapsulated in the skeleton arguments opposing the notice of claim. He emphasized that assets confirmed under the agreement was cotton lint and not the weigh bridge and the forklift. He added that for the claimant to be successful, they ought to have demonstrated an acknowledgment of debt or a default on the part of the r espondents whose goods were seized. He implored Court to disrniss the application with costs. 27. In reply, Ms. Ngandu stated that there was a debt of K 1,000,000 under a mortgage. She maintained that the claimant was legally inter ested both as a creditor and shareholder. Consideration and decis ion 28. Before delving into the intricacies of the issues raised by the application, it is noteworthy that the claimant did file an affidavit opposing the interpleader summons. My n avigation through the accompanying skeleton arguments does not reveal any issue for determination but rather r estates the position of the law as it relates to commencement of interpleader summons and the role of R 10 the sheriff 1n such proceedings. I will not venture into an academic exercise to restate what is already codified by statute. Moreover the interpleader summons is not averse but rather aids the notice of claim by clarifying the issue of ownership and in turn whether the claimant is justified in its claim. 29. I have considered the application before me, the evidence and the conflicting arguments advanced. In the context of the matter, the issues which I am required to interrogate and determine are as follows: (i) Whether the claimant has a right to claim the seized goods; (ii) Whether the sheriff can proceed with the sale of the seized goods and who should bear the costs of execution. 30. In resolving the forgoing issues, I am cognizant of the fact that the burden is on the claimant to prove its claim to the seized goods as stated in the case Eagle Charalambous Transport v . Percy Mulenga(9l and Richard v. Jenkins(10l. 31. From the evidence on record, it is common cause that the sheriff seized from the respondents the forklift and weighbridge on 4 th June, 2024 by way of walking possession. It is also uncontr overted t h at the respondents did enter into a loan facility with the claimant. R 11 32. It was contended by the complainant that the loan was not secured by the assets seized herein as these assets were obtained after the loan was acquired. The claimant on the other hand contends that the loan was secured by the Asset Protection Agreement fencing off all assets procured by the claimant for the respondents. 33. I have scrutinized the loan facility agreement on record which provides for security in clause 8 as follows: The loan will be secured through an Asset Protection Agreement by ring fencing the proceeds o( the sale of the lint and other products of the company. This means that all income from MFGPCO's business will be consigned to_ the Commission through tripartite agreement between the Commission, MFGPCO and the buyers of the Company's products using escrow accounts to effect the payments. The Commission will then deduct the applicable loan repayment and transfer the balance of the funds to MFGPCO. (Underlined for emphasis) 34. I have also considered clause 3 of the Asset Protection Agreement which contains the terms and conditions. Specifically, clause 3. 4 therein reads as follows: The seed cotton procured by the Borrower using the proceeds of the Trade Finance Loan shall be consigned to the Lender at all times and no seed cotton or cotton lint may at any time be sold by the Borrower to any buyer without an Asset Protection Agreement in place with the Lender. R 12 35. From the forgoing excerpts, it is clear that the two agreements do not provide that the loan facility is secured by the respondents' machinery and equipment. The documents indicate that the loan is secured by cotton lint and other products of the company and the proceeds from the sale of the said products. 36. The other argument on behalf of the complainant was that the claimant is a major shareholder in the respondent company as evidenced by a print out from PARCA. I have had recourse to the case of Zlatan Zlatko Arnautovic v . Stanbic Bank and Attorney General(11l in which it was held that "The appellant against whom the process was issued, was precluded from lodging any notice of claim to goods. " 37. By raising the issue of the shareholding in the respondents, the complainant is indirectly asking this Court to veer through the veil of incorporation to appreciate who the beneficial owners of the 2 nd respondent are. I will, however, refrain from delving into this issue as it has not been traversed by the parties. 38. Having said that, I have considered two issues, firstly, the writ of fieri facias and secondly the status of the seized goods. In relation to the writ of fieri facias , I have had recourse to the case of Mpande Nchimunya v . Stephen Hibwani Michelo112l cited by complainant wherein it was held interalia that: Where a writ of execution is regularly issued and goods of a judgment debtor are seized then the question of wrongju.l execution or seizure does R 13 not arise. This is so even where goods of a third pers on in possession of a judgment debtor are seized in execution thereof 39. I am also alive to th e holding of the Supreme Court in the case of Tap Zambia Limited v. Percy Limbusha and Eight OthersC13l in which it was held that: A writ of execution which is improperly or irregularly issu ed ought to be set aside at any stage so that, in an appropriate case, liability should attach to the party on whose demand the irregular execution process has been issued. 40. From the evidence on record, I am satisfied that there was nothing irregular about the writ and it is uncontroverted that is was duly executed. 41. As it pertains to the seized goods, the claimant has not proved that the assets s eized were subject of the Assets Protection Agreement, or the loan facility. If there was such fu1 agreement relating to the s eized goods, it was for the claimant to prove. 42 . In view of the forgoing, I find that the claimant has not s atisfied me of its interest in the seized forklift and the weighbridge. The notice of claim is thus dismissed. 43. Having already found that the writ of fieri facias was regularly issued , it follows that the process of enforcement should be consummated. R 14 44. In terms of costs, Halsbury's Laws of England, volume 25 paragraph 1058 states that: The execution creditor is primarily responsible for the sheriff's costs and charges of the interpleader proceedings, for it was he who put the sheriff into motion by delivering the writ of execution which the sheriff was obliged to accept, and he therefore, in a sense, made it necessary fo r the sheriff to interplead. So, even where the execution creditor has been successful as against the claimant, the execution creditor must still pay the sheriff's costs and charges of the interpleader proceedings; but, in that event, the execution creditor will have a remedy over against the unsuccessful claimant for those costs and charges. 45. Thus, having been unsuccessfu l, I determine that the claimant shall bear the sheriff's costs and costs of the interpleader proceedings. 46. Leave to appeal is granted. Delivered at Lusaka this 9 th day of October, 2024 .. ..... .... ~ .. ' ... .. . M. C Mikalile HIGH COURT JUDGE R 15