Patel and Anor v Development Bank of Zambia (Appeal 55 of 2003) [2005] ZMSC 51 (18 October 2005)

IN THE SUPREME COURT FOR ZAMBIA - APPEAL NO. 55/2003 HOLDEN AT LUSAKA (CIVIL JURISDICTION) BETWEEN: Ebrahim Yousouf Patel Musa Adam Yousouf - - 1st Appellant 2nd Appellant And Development Bank of Zambia- Respondent Coram: Lewanika, DCJ , Mambilima and Silomba, JJS, on the 1st of July 2004 and 18th October, 2005. For the Appellants For the Respondent - - Mr. N. K. Mutuna of N. K. M. and Associates. Mr. M. Kapumpa of Malambo and Company. JUDGMENT Mambilima JS. Delivered the Judgment of the Court. This is an appeal against the Ruling of the High Court, refusing an application by the Appellants to review its earlier Ruling given on 20th December, 2002. The background of this case is that on 23rd September 2002, the Respondent, Development Bank of Zambia, took out a Writ of Summons against eight (8) Defendants, two of whom were the Appellants herein. The 1st Appellant was the 4th Defendant, while the 2nd Appellant was the 3rd Defendant. In its statement of claim, the Respondent stated that under a Deed of Guarantee, dated 21st April, 1994, the Defendants had guaranteed the repayment of a loan in the sum of US$ 1,570,661, together with interest advanced by the Respondent to ZARNUS Marble and Terrastone Limited. The Respondent alleged that the said ZARNUS Marble and Terrastone Limited had failed to pay off the loan. Consequently, it had sent notices to the Defendants, as Guarantors of the said loan, to settle the amounts which were still outstanding. It was further stated in the statement of claim that the Defendants had failed or neglected to settle the amounts owing, and hence, the Respondent claimed from them arrears on the principal, amounting to US$ 1,328,880.58 and interest arrears amounting to US$ 485,531.94. On 28th October 2002, the Appellants herein applied to the Court below to dismiss the case against them on the ground that the Writ of Summons and the Statement of Claim had not been personally served on them. On 5th November 2002, the Court allowed the application and granted the Appellants an Order dismissing the action against them. This Order was set aside on 4th December 2002 on an application for review by the Respondent. The Court allowed the parties to argue the Appellants application to dismiss the action denovo. After hearing arguments from both sides, the Court granted the application and ordered that the action should stand dismissed as against the Appellants on the ground that the Writ of Summons was not personally served on them. The Appellants applied for a review of this Order seeking a release of security documents which they provided to the Respondent as Guarantors of the loan to ZARNUS Marble and Terrastone Limited. The learned Judge refused the application. She was of the view that the dismissal of the action did not alter the Parties’ contractual obligation under the guarantees, more so, that the dismissal of the action was at the preliminary stage and on account of failure to comply with the procedural requirements governing service of court process. The Appellants have now appealed to this Court against this Ruling advancing two main grounds of appeal, that: (a) the learned Judge in the Court below erred when she held that the dismissal of the Respondent’s action as against the Apellants, pursuant to Order 12/8A of the Rules of the Supreme Court did not discharge them from the action as a whole; and (b) the learned Judge erred when she held that the dismissal of the Respondent’s action against the Apellants did not amount to the ceasing of the Respondent’s case as against the Appellants. Both parties filed written submissions. It is not our intention to restate the said submissions. The gist of the submission on behalf of the Appellants is that for as long as the Respondent does not take any further steps in the proceedings in the Court below, the action stands dismissed as against the two Appellants. They argue that consequently, the assets are freed from the action and that it was therefore an error, on the part of the Judge, to have refused the Appellants’ application which sought an Order to compel the Respondents to release the security documents in respect of Plot 8063, Lusaka. The Respondent’s response is that the dismissal of its action against the Appellants was not fatal. Mr. Kapumpa argued that the Deed of Guarantee in question is not only an agreement between the Bank and the Guarantors but also among the Guarantors themselves. He argued that none of them can be released from the guarantee without paying the loan because they have obligations arising out of the agreement to pay. We have considered the submissions of the parties and the issues raised. It is common cause that the action in this case arises out of a Deed of Guarantee which was executed in favour of the Respondent by the Appellants, together with six others guaranteeing the repayment of a loan obtained by Zarnus Marble and Terrastone. It is also common cause that the Respondent issued process against the eight guarantors in a bid to enforce the guarantee. This action was dismissed as against the Appellants, for the reason that process was not served on them personally. It is clear to us that the dismissal of the action against the Appellants did not go to the root of the validity or indeed the obligations of the guarantors under the Deed. It was merely on account of failure by the Respondent to serve the Writ and the Statement of Claim personally on the Appellants. It is open to the Respondent to institute fresh proceedings against the Appellants to cure the procedural defect, which led to the dismissal of the action. We therefore agree with the learned Judge in the Court below that the dismissal of the case against the Appellants did not set aside or indeed alter contractual obligations of the guarantors under the deed. We find absolutely no merit in this appeal. It is dismissed with costs to the Respondent, to be taxed in default of agreement. D. M. LEWANIKA DEPUTY CHIEF JUSTICE I. C. MAMBILIMA SUPREME COURT JUDGE S. S. SILOMBA SUPREME COURT JUDGE 5