Indo Zambia Bank Limited v El Paraiso Estates Limited and Anor (2023/HPC/0789) [2024] ZMHC 241 (12 February 2024)

IN THE HIGH COURT FOR ZAMBIA AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) 2023/HPC/0789 IN THE MATTER OF ORDER 30 RULE 14 OF THE HIGH COURT RULES, CHAPTER 27 OF THE LAWS OF ZAMBIA. IN THE MATTER OF ORDER 88 OF THE RULES OF THE SUPREME - AND IN THE MATTER OF BETWEEN: COURT, 1965 VOLUME 1 1999 EDITION (WHITE BOOK) THE PROPERTY COMPRISED UNDER A THIRD - PARTY MORTGAGE OVER FARM NO. 2287362, MPIKA. INDO ZAMBIA BANK LIMITED APPLICANT AND EL PARAISO ESTATES LIMITED SICHONE MALOZO 1 ST RESPONDENT 2ND RESPONDENT Coram: Hon. Lady Justice Chilombo Bridget Maka For the Applicant: Ms. M. Kumwenda - Ventus Legal Practitioners For the Respondents: Messrs. Make bi Zulu Advocates - No Appearance JUDGMENT Legislation referred to: 1. The High Court Rules, Chapter 27 of the Laws of Zambia 2. The Rules of the Supreme Court, 1999 Edition. Cases referred to: 1. National Drug Company Limited and Zambia Privatisation Agency vs. Mary Katongo SCZ Appeal No. 79/2001 2. Friday Mwamba vs. Sylvester Nthenge and Others SCZ Judgment No. 5 of2013 3. Printing and Numerical Registration Company vs. Sampson ( 1875) LR 19 Eq at 465 4. Kanjala Hills Lodge Limited and 4 Others vs. Stanbic Zambia Limited (2012 Vol.2) 285. 5. Courtyard Hotel Limited and 3 Others vs. First National Bank Zambia Limited and Another Appeal No. 006/2015 6. Cavmont Bank Limited vs. Chilufya (T / A Chilufya Associates) and Another (2017 /HPC/0230) 7, Dymond vs. Croft (1876) 3 ChD 512 8. Lackson Mwabi Mwanza vs. Sangwa Simpasa and Another (2005/HP/0500) 9. S. Musonda (Receiver of First Merchant Bank Zambia Limited (in receivership vs. Hyper Food Products and Others (1999) Z. R. 124 10. Reeves Malambo vs. Patco Agro Industries Limited (S. C. Z Judgment No. 20 of 2007) 11. African Banking Corporation (Z) Limited vs. Plinth Technical Works Limited and Others (SCZ/8128/2015) (2015) ZMSC 42 (9 September, 2015) 1.0. Introduction 1. 1. By Originating Summons dated the 16th November, 2023, Inda Zambia Bank Limited, sued the Respondents seeking the following reliefs: -J2- • • i. Payment of all monies due to the Applicant under the covenants of a Facility Letter dated 28th July, 2022 and made between the Applicant and the 1st Respondent, as secured by: a Third-Party Mortgage over Farm No. 2287362, Mpika, owned by the 2 nd Respondent, and registered on 13th September, 2022, to secure an Overdraft Facility in the sum of ZMW600,000.00 (Zambian Kwacha Six Hundred Thousand) and a Term Loan in the sum of ZMW2,150,000.00 (Two Million, One Hundred and Fifty Thousand); and a Fixed and Floating Debenture over the current and future assets of the 1st Respondent; ii. An Order that on the true construction of the aforementioned credit facilities, that as at 6 th November, 2023, the respective total sums of ZMW 644,669.17 (Zambian Kwacha Six Hundred Forty-Four Thousand, Six Hundred Sixty-Nine Thousand,Seventeen Ngwee) and ZMW 2,491,888.48 (Zambian Kwacha Two Million, Four Hundred Ninety-One Thousand, Eight Hundred Eighty-Eight, Forty Eight Ngwee), are due to the Applicant. iii. An Order that until payment shall have been made to the Applicant of the balance (together with the costs of this action) the 2 nd Respondent is not entitled to redeem the Mortgaged Property; -J3- iv. An Order that the Third-Party Mortgage over Farm No. 2287362, Mpika shall be enforced by foreclosure and/ or sale; v. Delivery of possession of Farm No. 2287362, Mpika to the Applicant by the 2 nd Respondent or persons having the property subject to the Third-Party Mortgage or by any other person, or alleged to be in possession of the property; vi. An Order for the enforcement of the Fixed and Floating Debenture over the current and future assets of the 1st Respondent; vii. Interest at the contractually agreed rate as contained in the Facility Letter; viii. Further or other relief that the Court may deem fit' ix. Costs. 1.2. The Originating Summons was pursuant to Order 30 Rule 14 of the High Court Rules and Order 88 of the Rules of the Supreme Court 1999 edition. 1.3. The Originating Summons was accompanied by an affidavit in support and skeleton arguments. 1.4. The Respondent did not file any affidavit in opposition despite being served with the originating process. -J4- e 2.0. Evidence in Support of Originating Summons 2.1. The affidavit in support was deposed to by Masuka S. Mutondolo, the Credit Manager in the employment of the Applicant. 2.2. The gist of the evidence was that by Facility Letter dated 28th July, 2022, the Applicant availed the 1st Respondent an Overdraft facility with a limit of K600,000.00 (Zambian Kwacha Six Hundred Thousand) and a Term Loan Facility in the sum of K2, 150,000.00 (Two Million, One Hundred and Fifty Thousand). The Facility Letter was shown to the Court as exhibit "MSM 1". 2.3. The said facilities were secured by a Third Party Mortgage over Farm No. 2287362, Mpika, owned by the 2nd Respondent and a Fixed and Floating Debenture over the current and future assets of the 1st Respondent Company. The Third Party Mortgage was registered on 13th September, 2022. The Registered Mortgage and perfected Deed of Debenture were exhibited as "MSM 2". 2.4. It was deposed further that by clause 3.1 of the Facility Letter, the Applicant and the 1st Respondent agreed that the facilities would attract interest at a floating rate of 29.5% per annum. It was further agreed under clause 3.2. of the facility letter that the interest would be charged and recovered monthly in arrears on the daily outstanding balances on a compound basis. -JS- 2.5. The overdraft facility was to be repaid within 12 months following the date of disbursement, whilst the loan amount was to be repaid 1n 60 months from the date of disbursement by way of 54 monthly payments, commencing after a 6 month moratorium period. 2.6. I: was averred that the 1st Respondent has since defaulted on its repayment obligation. It's thus indebted to the Applicant in the respective sum of K644,669.17 (Zambian Kwacha Six Hundred Forty-Four Thousand, Six Hundred Sixty-Nine Thousand Seventeen Ngwee) and K2,491.888.48 (Zambian Kwacha Two Million, Four Hundred Ninety-One Thousand, Eight Hundred Eighty Eight, Forty Eight Ngwee) inclusive of interest as at 6 th November, 2023. The 1st Respondent's latest statements of Account with the Applicant was exhibited as "MSM 3". 2. 7. That despite several reminders and demands by the Applicant, the Respondent have failed and or neglected to pay the outstanding sums due and owing to the Applicant. 2.8. It was lastly averred that the Applicant's claim is not in excess of any amount as prescribed under the Banking and Financial Services Act No. 10 of 2017 of the Laws of Zambia and no interest has been charged on the Respondents facility. -J6- 3.0. Applicant's Arguments in Support of Originating Summons 3.1. The Applicant's submissions are dated the 16th November, 2023. The gist of the submission being that the Credit Facility Agreement and the Third Party Mortgage entered into by the parties should be given full effect by the Court. 3.2. The cases of National Drug Company Limited and Zambia Privatisation Agency vs. Mary Katongol 1>, Friday Mwamba vs. Sylvester Nthenge and Others121 and Printing and Numerical Registration Company vs. Sampson131 were cited to argument the submission and urge the Court to uphold the agreement of the parties. 3.3. It was further submitted that the Applicant was justified to commence these proceedings as the 1st Respondent defaulted on its obligation under the Credit Facility Agreement. The cases of Kanjala Hills Lodge Limited and 4 Other vs. Stanbic Zambia Limited14> and Courtyard Hotel Limited and 3 Others vs. First National Bank Zambia Limited and Anotherf5 ) were cited on the ramifications of a breach of the agreement. It was contended that the Applicant was entitled to claim the sums due under the Credit Facility Agreements, Third Party Mortgage and all other remedies available. 3.4. The Applicant further submitted that the remedies of a Mortgagee are cumulative and can be pursued concurrently. The Applicant relied on Order 30 Rule 14 ' and the cases of Cavmont Bank Limited vs. Chilufya -J7- (T/A Chilufya Associates) and Anotherf61, Dymond vs. Croft171, Lackson Mwabi Mwanza vs. Sangwa Simpasa and Anotherf81 and S. Musonda (Receiver of First Merchant Bank Zambia Limited (in receivership vs. Hyper Food Products and Others19 1 in support of the submission that the Applicant was within its rights to employ one or more remedies to enforce payment from the 1st Respondent. 3.5. As regards the Applicant's right to claim the relief of foreclosure and sale, the case of Reeves Malambo vs. Patco Agro Industries Limitedl 101 was cited. 3.6. The concluding submissions related to the enforcement of the fixed and floating Debenture of the 1st Respondent. 3. 7. It was submitted that this Court has jurisdiction to enforce the fixed and floating Debenture perfected over the assets of the 1st Respondent together with the other reliefs sought. 3.8. That this was in line with the decision of the Court in the case of African Banking Corporation (Z) Limited vs. Plinth Technical Works Limited and Others1 111. 3.9. It was contended that for the avoidance of multiplicity of actions, the relief for an order for enforcement of the fixed and floating Debenture was rightly sought in this action. 3.10. The Applicants prayer was that the Court grants the Applicant the reliefs sought in this action and or any other relief it may deem fit. -JS- 4.0. Hearing of the Application 4.1. Counsel for the Applicant, Ms. M. Kumwenda, represented the Applicant at the hearing of the Originating Summons. There was no appearance by the Respondent. 4.2. An affidavit of service dated 15th January, 2024, showed that both Respondents were duly served with the Notice of hearing. 4.3. In addition, Ms. Kumwenda informed the Court that the Respondents were served with the originating process on 5 th December, 2023 and had since engaged Messrs. 11akebi Zulu Advocates. 4.4. On account that no reasons were advanced for the absence of the Respondents, I proceeded to hear the Applicant. On her part, Ms. Kumwenda entirely relied on the affidavit in support and skeleton arguments filed on 16th November, 2024. 5.0. Consideration and Determination. 5.1. I have considered all the evidence and submissions filed into Court by the Applicant. 5.2. It is trite that there is no affidavit in opposition filed by the Respondent. This entails that the Respondent has not traversed or denied the Applicants claims. 5.3. The foregoing notwithstanding, the Applicant bears the burden to prove the case on the balance of probabilities. As was restated in Khalid Mohammed vs. Attorney -J9- Genera1121, a Plaintiff cannot automatically succeed whenever a defence has failed, he must prove his case. 5.4. It was not in dispute that by Facility Letter dated 28th July, 2022, the Applicant availed the 1st Respondent an Overdraft Facility with a limit of K600,000.00 (Zambian Kwacha Six Hundred Thousand) and a Term Loan Facility in the sum of K2, 150,000.00 (Two Million, One Hundred and Fifty Thousand). The Facility Letter dated 28th July, 2022 is exhibited as "MSM 1" and was signed by the 1st Respondent. 5.5. It is further not in contention that the Overdraft Facility and a Term Loan Facility were secured by a Third Party Mortgage over Farm No. 2287362, Mpika and the Third Party Mortgage Deed is shown as exhibit "MSM 2". 5.6. The said mortgaged property is owned by the 2 nd Respondent who is also the Director in the 1st Respondent Company. 5.7. According to clause 3.1 of the Facility Letter, both the Overdraft and Term Loan were to attract interest at a floating rate of 29.5% per annum comprising the Bank of Zambia Policy Rate of 9% and the Applicant's Bank margin of20.5%. 5.8. It is further common cause that the 1st Respondent has since defaulted on its repayment obligations on the two facilities. The 1st Respondent's loan statement exhibited as "MSM 3" shows the sums outstanding as at 6th -J10- November, 2023 are K644,669.17 (Zambian Kwacha Six Hundred Forty-Four Thousand, Six Hundred Sixty-Nine Thousand Seventeen Ngwee) and K2,491.888.48 (Zambian Kwacha Two Million, Four Hundred Ninety-One Thousand, Eight Hundred Eighty-Eight, Forty Eight N gwee) respectively. 5.9. The Applicant now seeks to enforce the Third Party :tvlortgage and the Fixed and Floating Debenture pursuant to Order 30 Rule 14 and Order 88 Rule 1 of the Rules of the Supreme Court which provisions outline the remedies available in a mortgage action. Order 30 Rule 14 of the High Court Rules provides as follows: "Any mortgage or mortgagor, whether legal or equitable or any person entitled to or having properly subject to a legal or equitable, charge, or any person having the right to foreclosure or redeem any mortgage, whether legal or equitable, may take out as of cause an originating summons returnable in the Chambers of a Judge for such relief of the nature or kind following as may be the summons be specified, and as the circumstances of the case may require, that is to say: Payment of moneys secured by the mortgage or charge. Sale Foreclosure Delivery of possession (whether before or after foreclosure) to the mortgagee or person entitled to the charge by the mortgagor or person having to property subject to the charge or by any other person in or alleged to be in possession of the property ... " -Jll- 5.10. It is further trite law as restated in a plethora of cases, one such case being S. Musonda (Receiver of first Merchant Bank Zambia Limited (in receivership) vs. Hyper Foods Products and Others191 that the mortgagee's remedies are truly cumulative. 5.11. In this case, the 1st Respondent defaulted on its repayment obligations on the overdraft facility and the loan term facility. 5.12. A Third Party Mortgage was created between the Applicant and the 2 nd Respondent. The Applicant is entitled to payment of outstanding sums of monies with contractual interest, foreclosure of the mortgaged property and sale of the said property. 5.13. The Applicant is further entitled to enforce the fixed and floating Debenture perfected over the assets of the 1st el Respondent. 6.0. Conclusion and Orders 6.1. The Applicant has proved its case against the respondents on the balance of probabilities. 6.2. I therefore enter Judgment in favour of the Applicant in the sums of K664,669. l 7 (Zambian Kwacha Six Hundred Forty-Four Thousand, Six Hundred Sixty-Nine Thousand Seventeen Ngwee) due on the Overdraft Facility and the sum of K2,491.888.84 (Zambian Kwacha Two Million, Four Hundred Ninety-One Thousand, Eight Hundred -J12- Eighty-Eight, Forty Eight Ngwee) due on a Term Loan with contractual interest from date of Originating Summons to date of Judgment and thereafter at current bank lending rate as determined by Bank of Zambia. 6.3. The Respondents shall pay the Judgment sum together with interest within 60 days from the date hereof. 6.4. In the event of default, the Applicant shall be at liberty to foreclose and sale the mortgaged property being Farm No. 2287362, Mpika . 6.5. The 2 nd Respondent shall thus deliver vacant possession of the property to the Applicant. 6.6. The Applicant shall further enforce the fixed and floating Debenture over the current and future assets of the 1st Respondents. 6.7. Costs for and incidental to this action are awarded to the Applicant to be taxed in default of agreement. • Delivered at Lusaka this 12th day of February, 2024. Chilombo Bridget Maka HIGH COURT JUDGE -JB-