Mwila Lumbwe and Ors v Mushota (SCZ Appeal 72 of 1998) [2000] ZMSC 117 (9 May 2000)

IN THE SUPREME COURT OF ZAMBIA HOLDEN AT LUSAKA (Civil Jurisdiction) SCZ APPEAL NO. 72/98 BETWEEN MWILA LUMBWE (MALE) (SUED AS LIQUIDATOR, RECEIVER/MANAGER OF CREDIT AFRICA BANK LIMITED (IN RECEIVERSHIP) 1st APPELLANT MR O. V. GONDWE (MALE) (SUED AS ACTING MANAGING DIRECTOR OF CREDIT AFRICA BANK LIMITED (IN RECEIVERSHIP) BANK OF ZAMBIA THE ATTONEY GENERAL OF ZAMBIA 2nd APPELLANT 3rd APPELLANT 4th APPELLANT AND DR. REMMY KABANDA KA1NDU MUSHOTA RESPONDENT Coram: Chaila, Chirwa, Lewanika, JJS 19th November, 1998 and 9th May, 2000 For the Appellants : Mr. M. Mundashi of Messrs. Mundashi & Associates; Mr. A. Wood of Messrs. A. M. Wood & Company; Mr. F. Chishimba of Messrs. Fraser Associates. For the Respondent : In person JUDGMENT Chaila, JS, delivered the judgment of the court. Mwila Lumbwe, Manager of Credit Africa Bank Limited (in Receivership), Mr. O. K Gondwe, Acting Managing Director of Credit Africa Bank Limited in Receivership); Bank of Zambia, and the Attorney General (hereinafter referred to as 1 - J2 - Appellant, 2nd Appellant, 3rd Appellant and 4,h Appellant, respectively, appealed against a decision of the High Court (Kabamba, J) granting an injunction in favour of Dr. Remmy Kabanda Kaindu Mushota (the late), hereinafter referred to as the Respondent. The brief facts of the case were that the respondent was a customer of the 2nd appellant. He maintained a sound account with the 2nd appellant. The 2nd appellant was an established bank carrying out functions of banking and financial services having been incorporated in Zambia under the Banking and Financial Services Act to carry out the functions of banking and financial services in Zambia. The 2nd appellant experienced some problems and on 20th November, 1997 the bank closed its doors for any banking business. On 6th March, 1998 the Bank of Zambia, acting in the exercise of the provisions of Section 101 of the Banking and Financial Services Act Cap. 387 of the Laws of Zambia resolved and ordered the Credit Africa Bank Limited, the 2nd appellant, to wind up by way of compulsory liquidation in accordance with the provisions of the Banking and Financial Services Act. It further ordered that any director, shareholder, other owner, depositor and other creditor of Credit Africa Bank Limited had a liberty to file in court an objection or appeal, not later than 30 days from the date of publication of the notice in the Government Gazette. The respondent on 20th March, 1998 filed a petition under Article 28 of the Constitution of Zambia, Cap. 1 and under the Protection of Fundamental Rights Rules of 1969 and in accordance with Article 16 of the Constitution for an order or directive for recovery of the petitioner’s monies deposited in current A/C No. 0001 000 0393 100 with Credit Africa Bank Limited at Anchor House, Cairo Road, Lusaka, for business and social purposes and for rescission of contractual relationship of banker-customer pursuant to Misrepresentation Act, Cap. 69 of the Laws of Zambia. The respondent further prayed for declaration and injunction on the other orders pursuant to Order 27(1), (3) and (4) of Cap. 27 of Laws of the Zambia against the liquidator of the bank and prayed further for statutory inquiries into appointments and competencies of and criminal conduct of - J3 - Directors, Managers, Members and Officials of the Credit Africa Bank Limited for mandamus. The respondent then prayed for an interlocutory injunction. The High Court granted the injunction and ordered the bank and other appellants to suspend the compulsory liquidation. The respondent in pursuance of the order granting the injunction drafted the interim injunction order as follows: “IT IS ORDERED THAT the respondents be restrained and an injunction is hereby granted restraining them and/or their agents or servants from proceeding with the compulsory liquidation of the Credit Africa Bank Limited and from denying the applicant herein accessibility to his unencumbered deposited funds which otherwise should be paid to him before 1 if' May, 1998 in order for him to avoid irreparable damage or injury which cannot be atoned for by an award of damages or by the compulsory liquidation of the Bank proceedings under which thee is a likelihood of him losing all the monies deposited with Credit Africa Bank Limited as unsecured creditor UNTIL further Order of this Court or UNTIL the issues and objections raised by the applicant in his petition are determined by the court of law. The order quoted above was signed on 8th May, 1998. We wish to note that the order of injunction also affected the Attorney General and the three appellants. The appellants have relied upon the following grounds: 1. That the High Court is not competent to grant an Injunction to a depositor of a bank restraining the liquidation of a bank which has been placed under compulsory liquidation under the provisions of the Banking and Financial Services Act Cap. 387. 2. That the learned Judge in the court below erred in law and fact by holding that a depositor of a bank which is in compulsory liquidation would suffer irreparable damage if liquidation of a bank would be put in place without - J4 - taking into account of the provisions of the Banking and Financial Services Act Cap. 387 of the Laws of Zambia. Counsel for both parties have mainly relied on their written heads of argument. They have, however, highlighted certain issues before us in their submissions. Mr. Mundashi counsel for the 1st 2nd and 3rd appellants informed the court that the Attorney General was not present or represented in the Supreme Court since he was not even represented in the lower court. On the injunction, Mr. Mundashi submitted that the Attorney general could not be present since no injunction lies against the State. On this issue, the respondent was silent. We have considered Mr. Mundashi’s view on the injunction regarding the State. The order by the learned trial Judge referred to the State. That is contrary to the Law and cannot be allowed to stand. The order should not have included the State. Without even considering the merit and demerit of the injunction, the order against the State is therefore quashed and set aside. Mr. Mundashi has argued that the appeal centres on the injunction granted by the High Court at Ndola to stop liquidation of Credit Africa Bank Limited. He has submitted that an injunction cannot be granted against the bank which has been put into liquidation under the provisions of the Banking and Financial Services Act. In his written heads of argument, Mr. Mundashi has emphasized that a bank registered under the provisions of the Banking and Financial Services Act can only be compulsorily liquidated under the provisions of Section 101 (1) of the Banking and Financial Services Act and not the provisions of the Companies Act. He drew our attention to the provisions of Section 85 of Chapter VII of Cap. 387, which make clear that if there is any inconsistency between the provisions of that chapter and any other written law, the provisions of that chapter would prevail to be extent of the inconsistency. He maintained that the intention of the legislature was that the compulsory liquidation of the bank would be done by mere resolution of the Board of Directors of Bank of Zambia as opposed to applying for a - J5 - petition to wind up under the companies Act. He further drew our attention to the High Court decision by Silomba, J, in Promise M. Shinondo and Kapompo Limited and Rank of Zambia 1996/HP/2003. This case dealt with a similar situation. Mr. Mundashi urged the court to allow the appeal having no regard of the provisions of the Act under the law. He argued that the respondent had no clear right to relief in the main action. Mr. Mundashi further relied on the authority of Shell and BP Zambia Limited Ps Conidaris and others (1975} ZR 174. In reply to Mr. Mundashi’s argument on ground I, Dr. Mushota argued that the facts showed that he was a bona fide depositor and that when he heard rumours that the bank was in financial problems, he went to the bank to get the money. He was not given the money. He then decided to go for an injunction. He argued that under the Banking and Financial Services Act, the seizure must come first before liquidation and there must be an order before the High Court. He maintained that in the present case there was no application and that is why he applied for an injunction. He urged the court to disregard Judge Silomba’s interpretation since that was not binding on this court. On Section 85 of Cap. 387 of the Laws of Zambia, Dr. Mushota argued that there was no inconsistency between the two Acts, i.e Cap 387 and Cap. 388. He emphasized this point by relying mainly on his written heads of argument, which briefly provide that it was a common cause that Cap. VIII of the Banking and Financial Services Act, Cap. 387 of the Laws provided in its Part 3 exclusive right of the Bank of Zambia to seize a bank and thereupon appoint a Receiver. Dr. Mushota argued that in the present case this was what the Bank of Zambia did and appointed Mr. Mwila Lumbwe as Receiver/Manager for the seizure of Credit Africa Bank Limited in the year 1997. The heads provided that it was further common cause that under Section 100 of Cap. 387, the Bank of Zambia was allowed “to make an order for compulsory liquidation ” pursuant to the provisions of Section 101 of Cap. 287 In the written heads, Dr. Mushota discussed in detail that it was again common ground that there existed between the Credit Africa Bank - J6 - and it Receiver/Liquidator and Management and the Respondent - depositor, that the common law recognised lawful contractual relationship of Banker-Customer. He drew the attention of the court to the learned author Professor Pennington’s Commercial Banking Law (1978) and the decided cases cited by the learned author. He further referred the court to various cases. Dr. Mushota further in his heads of argument submitted that it was common ground that the bank was incorporated under the Companies Act, Cap. 388 as a limited liability company and discussed the principles of limited liability of the companies. He discussed the legal principles covering the company’s incorporation and famous cases of SALOMON Vs SALOMON AND COMPANY LTD. (1887) A. C. 22. Dr. Mushota further argued that it was not correct for the appellants to argue that a bank registered under the Banking and Financial Services Act, Cap. 387 can only be compulsorily liquidated under the provisions of Section 101 of Cap 387 and not the provisions of the Companies Act Cap 388. He maintained that Credit Africa Bank is a company registered under Cap. 388. Dr. Mushota argued that Section 101(1) of Cap. 387, i.e. winding up or liquidation of a bank by Bank of Zambia is just another alternative mode exclusively granted to Bank of Zambia by Parliament as the superintending central bank over other banks Mr. Mundashi on the second ground argued that Section 107 (1) of the Banking and Financial Services Act provides for the payment of debts in a compulsory winding up. The same Section provides for priority of creditors who include depositors He further submitted that the injunction signed by the learned trial Judge ordered the respondents to pay certain moneys such as school fees on behalf of the respondent. To him the said injunction order in effect purported to circumvent the provisions of Section 107 (1) on priority of creditors. The learned counsel invited us to look at the wording of the order and he relied on the authority of the Zambia State Insurance Corporation Ltd. Vs Dennis Mulukelela [1990-1992/ZR page 18. Mr. Mundashi further complained - J7 - about the injunction order itself. He submitted that the way the order was drafted, it had an effect of taking priority. He further submitted that under the section of the Banking and Financial Services Act, the order is provided for and he urged us to allow the appeal and dissolve the injunction. Mr. Mundashi in his submission referred us to the Companies Act Section 399. That Section provides special provisions for banking institutions. We will revert to this Section later in our judgment. In reply to Mr. Mundashi’s argument on the second ground, Dr. Mushota argued that he had raised clear issues, which were enough to go for trial. He submitted that he had proved to the court the necessecity of the Bank of Zambia having to apply to High Court by petition and that he had further proved the respondent’s Clear Rights and Locus Standi for being granted an injunction remedy. He drew the court’s attention to various authorities, particularly Msiska Vs Mobil Zambia Ltd; Shell and BP Zambia Ltd Vs Conidaris and Another (1974) ZLR 281; Turnkey Properties Vs Lusaka West Development Co. Ltd and Others (1984) ZLR 85; Nippon Yusen Kaisha Vs Karageorgis (1975) 1 WLR 1093. Relying on these authorities, Dr. Mushota urged the court to uphold the Judge’s decision in granting the injunction. Dr. Mushota invited the court to look at Statutory Instrument No. 16 of 1965 on the companies winding up rules and practice. We are greatly indebted to the parties for the authorities cited to us. We have read these authorities and we have taken them into consideration in our judgment. Mr. Mundashi has bitterly complained about the way the order was drafted. As we have already pointed out, the order as signed by the learned trial Judge was different from the order made in the open court when the injunction was given. We have analyzed the order. The order went far beyond what the Judge had pronounced in the open court. The wording of the order clearly gave the impression that a full relief was being given and not - J8 - just an injunction to stop the bank from being wound up. The order directed the bank to make certain payments. When Mr. Mundashi complained about the wording of the order, he was clearly on a very firm ground. The order should have not been worded the way it was. It was outside the judgment pronounced in the first instance. The learned counsel for the appellant has submitted that a bank registered under the provisions of Banking and Financial Services Act Cap. 387 can only be compulsorily liquidated under the provisions of Section 101 (1) of Banking and Financial Services Act and under the provisions of the Companies Act. We would like to point out that we are not dealing with the issue of dissolution of the company or the bank. We are concerned whether the injunction, which was granted to the respondent, was properly granted. We have been invited to consider the case of Zambia State Insurance Corporation Vs Dennis Mulukelela (1990-1992) ZR 18. In this case the Supreme Court considered the principles which the courts take into account when dealing with injunctions. The Supreme Court accepted the principles laid in the case of PRESTON Vs LUCK (1984) 27 Ch D 497, where it was stated: “Of course, in order to entitle the plaintiffs to an interlocutory injunction, though the court is not called upon to decide on the right o the parties, it is necessary that the court should he satisfied that there is a serious question to be tried at the hearing, and that on the facts before it there is a probability that the plaintiffs are entitled to relief.” Those principles have been followed by the Supreme Court in many cases, one of which is Shell and BP (Z) Ltd. Vs Conidaris and Others (1975) ZR 174 already referred to. In that case the Supreme Court held: “A court will not generally grant an interlocutory injunction unless the right to relief is clear and unless the injunction is necessary to protect the plaintiff from irreparable injury; mere inconvenience is not enough. Irreparable injury means injury which is substantial and can never be adequately remedied or atoned for by the damages, not injury which cannot be possibly repaired ” - J9 - In this particular case, the question of whether or not the respondent was likely to obtain the remedies asked for in his petition was vital. The learned trial Judge in his order did not fully address his mind to the provisions of the Company Act, particularly Section 399 Cap. 388 of the Laws of Zambia. The learned counsel for the appellants has relied heavily on this section. The section reads: “Nothing in this Act shall abrogate or affect any special legislation relating to companies carrying on the business of banking, insurance or any other business. The learned counsel has relied again on Sections 85 and 101 of Cap 387 which have provided special procedure for winding up banks. The respondent has maintained that the procedure laid down in the Companies Act should have been put into motion. We have seriously considered the provisions of the Companies Act, which have made a provision for special legislation relating to companies carrying out banking business and insurance business. It is common fact that the Credit Africa Bank Ltd. was the company carrying out the business of banking. It follows therefore, that the bank is caught up by the provisions of Section 399. It is further common cause that there is a special Act to cover the operations of the banks. We have read the Act, which has special provisions relating to liquidation and to the order of the payments. The learned trial Judge granted an injunction and the order which had the effect of nullifying an order of compulsory liquidation ordered by the Bank of Zambia, acting in accordance with the provisions of the Banking and Financial Services Act. The court below did not consider whether or not it was satisfied on the facts before it that the respondent was likely to succeed in the relief sought. The learned trial Judge further misdirected himself by giving an order with the effect of nullifying the order by the Bank of Zambia. For the reasons we have given, the appeal must succeed. The appeal is allowed. The injunction given is discharged. As regards to costs, we take judicial notice that the respondent died a few months ago and we make no order as to costs. J10 - M. S, CHAILA SUPREME COURT JUDGE D. K. CHIRWA SUPREME COURT JUDGE DfM. LEWANIKA SUPREME COURT JUDGE