Ratoyar Ltd & Ors v Luken Investments Ltd (APPEAL NO. 08/2022) (7 October 2024) – ZambiaLII

J1 IN THE SUPREME COURT FOR ZAMBIA APPEAL NO. 08/2022 HOLDEN AT LUSAKA (Civil Appellate Jurisdiction) BUCOFZA 0COURTOFQ\ BETWEEN: JUDICIARY 7 (J;: I Ll!l'.Y RATOYAR LIMITED st APPELLANT ~ CUJRT . YARED TEKLEMARIAM YEM~,~ 2nd APPELLANT ~50067, 1.- DESTA TEKLEMARIAM YEMANE 3rd APPELLANT SIMRET BUZU GHEBRESILASSIE 4th APPELLANT YAMANE RAIWA 5th APPELLANT AND LUKEN INVESTMENTS LIMITED RESPONDENT CORAM: Wood, Kabuka, Mutuna, JJS On 10th January, 2023 and 7th October, 2024. For the 1, 3, 4 and 5 Appellants: Mr. N. Okware, of Okware and Associates Mr. Mulenga of Kumasonde Chambers For the Respondent Mr. S. K. Simwanza, Ms M. Mulenga of Messrs Lungu Simwanza & Co. Ms K. Bwalya- Chulu of P. H. Yangailo &Co. JUDGMENT Kabuka, JS, delivered the Judgment of the Court J2 Cases referred to: 1. Kreditbank Cassel Gmbh v Schenkers Limited [1927] 1 KB 826 2. Freshmint and Others v Kawambwa Tea Company (1966) Limited (2008) ZR 3. National Airports Corporation Limited v Reggie Ephraim Zimba and Saviour Konie (2000) ZR 154 4. MRF Limited v Manohar Parrikar(2010) 11 sec 374 5. E.B.M v Dominion Bank (1937) 3 All ER 55 6. Lonhro Cotton Limited v Mukuba Textiles Limited (SCZ Judgment No. 168 of 2000 (unreported) 7. Masauso Zulu v Avondale Housing Project Limited (1982) ZR 172. 8. Devi Mal v The Standard Bank of India ( 1927) 101 I.C. 568 9. Smith Sawila v The Attorney General & Another, Appeal No. 1 of 2019; [2020] ZMSC 52 10. Mususu Kalenga Building Limited and Another v Richman's Money Lenders Enterprises ( 1999) ZR 27 11. Mumba v Lungu (2014) Vol.3 ZR 351 12. Zambia Bata Shoe Company Limited v Vin Mas Limited (1993/94) ZR 136 13. Base Property Development Limited v Chileshe & Others, Appeal 211 of 2015 14. Mwenya and Randee v Kapinga & Another (1998) ZR 23 15. Kang Hai Holdings Sdn Bhd v Lee Lai Ban [2018] 2 CW 550 Legislation referred to: 1. The Companies Act, Cap 388 ss. 24, 202, 216 (1) (a), (5) 2. The Lands and Deeds Registry Act, Cap.185 ss. 33, 34 Introduction 1. The appellants have come on appeal against a Court of Appeal judgment dated 12th December, 2019, that was decided in favour of the respondent. 2. It was in that judgment held that, an unsuspecting third party dealing with a company has the right to rely on the Indoor J3 Management Rule (Turquand rule) that protects such a party from any unsanctioned dealings entered into with the company. 3. This appeal is anchored on the exceptions to the Indoor Management Rule and the circumstances to which they may apply. It is the appellants' contention that the particular facts of this appeal fell squarely within the exceptions. Background 4. The background to the matter is that, the 1st appellant company was incorporated and registered with the Patents and Companies Registration Agency (PACRA) on 4th May, 2005. There were four directors and shareholders of the company, who were all Eritrean nationals and happened to be family members being husband, wife, daughter and son. In this appeal, they are respectively, the 4th, and appellants, and their shareholding in the 1st 3rd, 5th 2nd appellant company was as follows: Name Shares held 1. Desta Teklemariam Yemane (3rd Appellant) 400,000 2. Simret Buzu Ghebhesilassie (4th Appellant) 300,000 3. Raiwa Yemane (5th Appellant) 200,000 4. Yared Teklemariam Yemane (2nd Appellant) 100,000 J4 5. The appellants, were ordinarily resident outside Zambia save for the 2nd appellant. The 3rd and 4th appellants, were both business persons, resident in Kampala, Uganda, while the 5th appellant was an accountant, based in the United States of America. Only the 2nd appellant was resident in Zambia at the material time. 6. Sometime in 2006, the 1st appellant company, Ratoyar Limited, purchased a piece of land described as LUS/21734, situated off Mumbwa Road, in the Chinika industrial area of Lusaka ("the nd property"). This property was on 22 August 2006, registered at the Lands and Deeds Registry, with a Certificate of Title issued in rd the 1st appellant's name. According to the 3 appellant, the property was earmarked for the establishment of an electronics assembly plant. 7. Six years after the 1st appellant had acquired the property in nd issue, in February 2012, the 2 appellant approached one Abdussubhan Patel (PWl), a businessman resident 1n Emmasdale, Lusaka. The 2nd appellant informed PWl that he was selling his property situated in the Chinika Industrial area and nd was looking for a buyer. The 2 appellant availed PWl a copy of the Certificate of Title to the property belonging to the 1st appellant, Ratoyar Limited, as described earlier in paragraph 6. JS nd Upon seeing copy of the Certificate of Title, PWl took the 2 appellant with him to one Lukman Ismail Adam, (PW2), a director in the respondent company, Luken Investment Limited. 8. The 2nd appellant, PWl and PW2 thereafter, proceeded to the Chinika Industrial area to view the property where they found James Sambo (PW3), a security guard at the gate, who allowed them access the property. The property was inspected by PW2, after which a purchase price ofZMW300, 000.00 was agreed upon nd with the 2 appellant. 9. Following inspection of the property PW2, went to conduct a search on the 1st appellant, Ratoyar Limited, at PACRA. He obtained a computer printout of the search, which revealed that there were in fact four shareholders and directors of the 1st nd appellant company, with the 2 appellant holding the least number of shares as recounted earlier in paragraph 4. 10. That information notwithstanding, PW2 went ahead with the intended purchase of the property by the respondent company. To that end, various documents to facilitate the sale process and in respect of the conveyance were drawn up and executed. JG Relevant to the determination of this appeal are the following: Document Date 1. Ratoyar Limited "board resolution• 04.02.2012 signed by 2nd appellant only, authorising the sale of Stand LUS / 21734 2. PACRA computer printout reflecting four 07.04.2012 directors and shareholders of Ratoyar Limited 3. Contract of Sale for LUS/21734 for 21.04.2012 K300,000.00, executed between PW2 (Luken Investments Ltd) and the 2nd appellant (Ratoyar Ltd) in their individual capacities. The contract stated that the purchase price was to be paid by two equal instalments of K150,000.00 on execution of the contract and the balance on completion 4. State Consent to Assign 24.04.2012 5. Affidavit sworn by 2nd appellant for a 18.07.2012 Duplicate Certificate of Title for Stand LUS/ 21734 on the basis that the original was lost 6. Deed of Assignment for Stand LUS/ 21734 18.07.2012 executed between 2nd appellant, (Ratoyar Ltd) and PW2 (Luken Investments Ltd), without company seals of both companies affixed. 7. Certificate of Title issued in the name of 18.07.2012 Luken Investment Ltd as registered owner ofLUS/21734. 8. Power ofA ttorney granted to PW 1 by 2nd •undated appellant in his personal capacity, authorising PW 1 to act on his behalf in execution of the conveyancing documents relating to the sale transaction for Stand LUS/21734. J7 9. Payment of the Purchase price by installments as follows: (i) K52, 000.00 cash paid directly to 30.05. 2012 2nd appellant (ii) K48, 000.00 cash paid through one 30.05.2012 Iqbal Patel to 2nd appellant. (iii) K30, 000.00 cash paid to 2nd appellant 19.07.2012 through PW2 (iv) Cheque No. 252 drawn in favour of 25.02.2013 Ratoyar Limited in the amount of K60, 500.00 (v) Cheque No. 253 drawn in favour of 25.03.2013 Ratoyar Limited in the amount of K50, 000.00 10. Special resolution signed by 2nd appellant 04.02.2013 only, indicating the resignation of 3rd to 11. 5th appellants as Directors, and appointment of one Emmanuel Phiri as Director /Secretary of Ratoyar Ltd 12. Notice of change of directors filed at PACRA 04.05.2013 together with Form 3 of the Companies Acta Declaration of Consent to act as Director/ Secretary by Emmanuel Phiri. 13. Letter from 3rd and 4th appellants to Registrar 05.04.2013 of Companies referenced as: Fraudulent Special Resolution and Declaration of Consent to act as Director/ Secretary. 11. When the sale of the 1st appellant's property came to the attention of the 3rct, 4th and 5th appellants, they apparently returned to Zambia and went and stormed the property, claiming that the 1st JS appellant was still the registered owner, with the original Certificate of Title in the custody of the 3rd appellant, still in its name. All attempts on the part of the respondent to resolve the dispute amicably were unsuccessful. Proceedings before the High Court 12. In a quest to assert its rights over the property, the respondent on 25th March, 2013 caused a writ of summons to be issued against the appellants from the High Court Principal Registry at Lusaka. In the main, the respondent was seeking: (i) a declaration that it was the lawfully registered owner of Stand No. 12734, Chinika, Lusaka; and (ii) an order for continued occupation of the property as a bona.fide purchaser for value without notice of any fraud. 13. The 1st 3rd 4th and 5th appellants filed their defence denying the , , claims and counterclaim for the following relief: (i) an order declaring the conveyancing process conducted between the respondent and 2nd appellant, illegal, null and void, and for the reversion of the property to the 1st appellant; (ii) in the alternative, for an order that the respondent company pays the difference between the derisory sale price of ZMW 300, 000. 00 and market J9 value of the property pegged at USD400, 000.00; (iii) interest on the amount found due at the prevailing commercial bank dollar lending rate from date of writ till full payment, together with costs. 14. For his part, the appellant equally denied the respondents 2nd claims. He averred to the effect that, he was incarcerated at Kamwala Remand Prison for immigration related offences at the material time, and denied all the signatures on the conveyancing documents were his. 15. Upon considering all the evidence adduced, including the documents referred to in paragraph 8, the learned trial judge made the following findings of fact; (i) that the respondent's representative ought to have been more circumspect and placed on alert that he was dealing with a company; (ii) that for the Members' resolution to have been valid, it required the 1st appellant's company seal to be affixed and signed by all the directors; (iii) that the contract of sale and assignment were similarly flawed with no seals affixed for both companies, as the primary parties to the transaction. 16. Having established that there was in fact no Members' meeting held, the trial judge found no authority was granted to the 2nd appellant to dispose of the property in issue, as by law required. JlO On account of that irregularity and what he considered to be fraudulent conduct, the judge reasoned that the respondent was precluded from relying on the Turquand Rule. 17. The respondent's action was dismissed in its entirety, with an order directing cancellation of the Certificate of Title that had been issued in its name. Costs of the matter were awarded to the 1st , and appellants. The appellant was denied costs on 3rd, 4th 5th 2nd account of his possible participation in the transaction for sale which the trial court found to have been fraudulent. 18. The l•t, 3rd th and th appellants' counter-claim was allowed, , 4 5 with an order directing that the property reverts to the 1st appellant. In the alternative, that the respondent pays the 1st appellant the difference between the purchase price and market value that was placed at USD 400,000.00. Appeal to the Court of Appeal and decision 19. Aggrieved with the judgment of the High Court, the respondent launched an appeal to the Court of Appeal advancing six grounds of appeal. In substance the said grounds attacked the trial court's findings of fact. Jll 20. The Court of Appeal determined that when considered holistically, the evidence on record, went to confirm that the 2nd appellant as director, not only received money from the respondent, but also played an active role in the disposal of the property and actually orchestrated it. To buttress its' findings of wrong doing on the part of the appellant, the Court of Appeal referred to section 216 2nd (1) (a) of the Companies Act (since repealed), which prohibited directors of a company from selling, leasing or otherwise disposing of assets of the company, without a Members' resolution of the company sanctioning such disposal. The Court of Appeal interpreted the section to mean that, shareholders are the ones who must pass a resolution allowing the directors to dispose of the assets. In the present case however, it was noted that the resolution in issue was passed by the 'board of directors,' and not the shareholders. 21. In considering whether the respondent could still rely on the said resolution, the Court of Appeal noted that in terms of section 216 (l)(a) failure on the part of a company to comply with internal forms, would not affect the validity of any transfer or disposition of property. In the Court's words "it follows that once there is a purported resolution, a third party is not expected to make J12 further inquiries on the same". It was further noted that subsection 216 (5) similarly offered protection to a person dealing with the company in good faith. 22. By parity of reasoning, the Court of Appeal found that the 2nd appellant was a representative of appropriate authority and standing, for the class or type of transaction in question, and that the appellant was bound by his actions as decided by this 1st Court in National Airports Corporation Limited v Reggie Ephraim Zimba and Saviour Konie3 . 23. The Court of Appeal also found, that the trial court wrongly imputed fraud on the respondent, when fraud was never pleaded by the appellants and no evidence was led to that effect. The Court considered that the 3rd, 4th, and 5th appellants admitted in their defence and counter-claim that the 2nd appellant had executed the contract of sale and assignment whilst acting solely without authority. There was also no dispute that they had acknowledged he sold the property in question. 24. Granted those circumstances, the Court of Appeal's finding was that, imputing fraud on the respondent was a 1nisdirection on the part of the trial court. Accordingly, the Court of Appeal determined that there was merit in the respondent's appeal, J13 upheld it, and declared the respondent lawful owner of Stand No.12734, Lusaka, as a bona.fide purchaser for value without notice. Grounds of Appeal to this Court and Arguments 25. Dissatisfied with the Court of Appeal judgment, the appellants have now come on appeal to this Court advancing eight grounds in which they fault the Court of Appeal as having erred in law and fact when; "1. it failed to appreciate and apply the exceptions to the Indoor Management Rule/Turquand's rule to the facts of this case. 2. it exclusively placed too much reliance on the old case of Kreditbank Cassel GmbH, ignoring the later case of Fresh Mint Limited and Others v Kawambwa Tea Company Limited, and other cases which modified the Indoor Management Rule. 3. it failed or omitted to make pronouncements o:n certain grounds of appeal such as ground 3 which could have possibly changed the final judgment with costs being in the cause. 4. it failed or omitted to take into account the effect of the documentary evidence in the nature of the Power of Attorney filed by the respondent herein, in relation to the a execution of all the contractual documents vis vis the denial of all the signatures on the documents by one Yared Tecklemariam Yamane (2nd appellant) despite the court noting the signature denial in paragraph 4 of page JS of its judgment. 5. it failed or omitted to appreciate the fact that the respondent company was aware of the internal irregularity of the 1st appellant company and therefore good faith was not there when it received a defective purported resolution which was only signed by one director out of the four directors, when the respondent knew that the law required J14 that the resolution should be signed by all members of the company to be effective. 6. it failed or omitted to appreciate or take into account the fact that the respondent company was negligent as to the suspicious circumstances surrounding the sale/ purchase of the property in question because all the documents it had received such as the 1• t appellant's purported resolution (which the court shot down for not being a members' resolution but a purported board resolution at page Jl5 of its judgment) and the purported Power of Attorney were defective and created a reasonable red flag for the respondent to be extra careful especially that the asset in question was real property whose purchase by law requires extra due diligence. 7. it stated on page Jl6 paragraph 2 that, "it follows that once there is a purported resolution, a third party is not expected to make further enquiries on the same," when in fact receipt of an utterly defective resolution acts as a red flag since it makes the circumstances surrounding the proposed sale/purchase so suspicious as to warrant further investigative steps. 8. it failed to appreciate that section 24 of the applicable Companies Act did not apply where the presumed knowledge of the third party about some internal irregularity, was based on the fact that a particular third party actually, physically had a copy of the clearly defective internal document or resolution in this case; not only by virtue of the document having been lodged at the Registrar or being held by the company for inspection." Appellants' Arguments in Support of the Appeal 26. On the first ground of appeal relating to exceptions to the Indoor Management Rule, the appellants in their heads of argument contended that the Indoor Management Rule does not apply where the circumstances surrounding the transaction are obviously suspicious, appear irregular to a third party, and invite an inquiry. JlS 27. It was argued that, susp1c1on of an irregularity 1s widely recognized as an exception to the application of the Turquand Rule. An Indian Supreme Court decision in MRF Limited v Manohar Parrikar4 was referred to for the holding that, the rule does not apply where the circumstances surrounding a particular transaction are suspicious. 28. The appellants submitted that, the particular circumstances of the present appeal where only one, out of four directors, signed the purported Members' resolution termed 'board resolution,' were indeed suspicious and fell within the exceptions to the Indoor Management Rule. 29. To buttress the submission, reference was made to evidence on record from a director of the respondent company, PW2, in which he admitted he was aware of the existence of other directors of the 1st appellant company. PW2 also confirmed that his knowledge was based on a computer printout from a search conducted at PACRA that was in the respondent's possession at the material time. 30. Further reference was made to the same witness' evidence relating to receipt of a defective Power of Attorney, issued by a single director (the 2nd appellant) in his individual capacity to J16 transact in the purchase of an asset that was registered in the 1st appellant's name. Counsel underscored the point that, these circumstances were highly suspicious. 31. There were various decisions from other jurisdictions cited in support of the argument on suspicious circun1stances constituting an exception to the Indoor Management Rule. One such decision was the case of E.B.M v Dominion Bank.5 It was in that case held that, where a person dealing with a company could discover an irregularity if he had made proper inquiries, he cannot claim the benefit of the Indoor Management Rule .. 32. The arguments on suspicious circumstances were stretched to constitute negligent conduct. It was contended that, failure by the respondent in the present appeal to conduct the necessary inquiries on documents which did not bear the 1st appellant's company seal and, all the signatures of the other three directors, amounted to negligence on its part. 33. The submission was that, as the respondent was aware of the defective documents it cannot be allowed to profit from its own negligence. Knowledge of these irregularities, in itself, Counsel argued, vitiates the claim of good faith anticipated under section 216 (5) of the Companies Act. J17 34. Learned Counsel for the appellants went on to submit that, a resolution signed without a Members' meeting is null and void, unless there is a specific provision in the Company's Articles of Association authorizing such a situation. Counsel argued that the Contract of Sale, Assignment, Power of Attorney and the Members' resolution in issue in this appeal were all products of fraud and forgery as a result. 35. On account of all the irregularities and suspicious circumstances highlighted in paragraphs 26-34, learned Counsel for the appellants submitted that, the transaction for sale was a nullity and the Certificate of Title obtained by the respondent company on the strength of those documents should be cancelled. He concluded his submissions on ground one of the appeal, by contending that, since the property was not sold by the registered owner (1st appellant), the respondent company could not get better title than what the purported seller had. The decision of this Court in Lonhro Cotton Limited v Mukuba Textiles Limited6 was cited in support of this legal principle. 36. On ground two of the appeal, faulting the Court of Appeal for placing exclusive emphasis on the holding in the Kreditbank Cassel GmbH1 case. The appellants' contention was simply that J18 the Fresh Mint Limited2 case is a more recent judgment. It was decided 38 years after the former, and more importantly, is a Zambian decision which takes precedence over a case from another jurisdiction. Counsel submitted that the Fresh Mint Limited2 case clearly addresses the pre-conditions applicable with respect to the Indoor Management Rule, and further provides the exceptions to the said rule. 37. Coming to ground three of the appeal, which we note, as captured in paragraph 25.3, does not disclose the nature of the grievance. The appellants' heads of argument filed on record on 14th September, 2022 however, reveal that what the appellants are questioning in this ground, is the Court of Appeal finding that the trial court imposed on the respondent a standard of proof higher than one applicable in civil cases. 38. Counsel argued that no pronouncement was made by the Court of Appeal in relation to the trial court's finding of fraud, when a decision on the issue could have affected the order on costs of the appeal, that the appellants were condemned to bear. The submission was that, the Court of Appeal had a duty to adjudicate upon every ground of the appeal between the parties so that every J19 matter in controversy was determined with finality as decided in Masauso Zulu v Avondale Housing Project Limited7 . 39. Regarding the issue subject of grounds four, five, six and seven, as to whether the respondent company could be said to have acted in good faith in the transaction for sale of the property, when it was aware of the many irregularities, including those related to the Power of Attorney and 1st appellant company's defective Members' resolution. Counsel maintained the submission on ground one, that the doctrine of Indoor Management does not apply to those who negligently fail to make proper inquiries, even after noticing suspicious circumstances surrounding the proposed transaction. 40. It was argued that, the respondent company could not rely on the Indoor Management Rule as it was complicit in its dealings and knew of the irregularities well before entering into the transaction in issue. The Indian Supreme Court decision in Devi Mal v The Standard Bank of India8 was called in aid of the submission. It was there, held that, a person who has actual or constructive notice of prescribed procedures not having been complied with, will not be entitled to the protection of the Turquand Rule. The submission on the point was that, the requirement that no J20 company asset can be sold or transferred without a Members' resolution signed by all the members under section 216 of the Companies Act, was not a private or internal matter, but a matter of law of which the respondent was well aware. 41. Counsel went on to submit that section 202 of the Companies Act did not apply, on the basis of the case of Smith Sawila v The Attorney General and Another.9 We, in the said case decided that under section 33 of the Lands and Deeds Registry Act, a Certificate of Title is conclusive evidence of ownership of land by a title holder. We, nonetheless, went on to caution that pursuant to section 34 of the same Act, a Certificate of Title can be challenged and cancelled for fraud or for reasons of irnpropriety in its acquisition. In that regard, Counsel submitted that, the act of the respondent proceeding to purchase company property on the strength of a defective resolution termed, 'board resolution' was in contravention of, or ultra vires, the Companies Act. 42. On the basis of evidence of impropriety in the manner in which the respondent company purchased the property from the 1st appellant, together with evidence that fraud was demonstrated and proved to the required standard; Counsel submitted that, the Certificate of Title in the name of the respondent company should J21 be canceled pursuant to section 34 of the Lands and Deeds Registry Act. 43. The Court of Appeal's determination of the matter expressed in the statement, 'it follows that once there is a purported resolution, a third party is not expected to make further enquiries on the matter,' was faulted as an exaggeration. Counsel submitted that the High Court was on firm ground in its findings and should be upheld. 44. Finally, on the issue raised in ground eight of the appeal whether, as held by the Court of Appeal, section 24 of the Companies Act applied to this case. Counsel argued that, the presumption that a person dealing with a company has notice or knowledge of the contents of a document by virtue of it being lodged with the Registrar at PACRA did not arise in this instance. Counsel underscored the point that, this argument was anchored on evidence on record, confirming that the respondent corr1pany had actual physical copies of the clearly defective documents, prior to entering into the transaction for sale of the property. 45. Counsel reiterated the argument that, the director of the respondent company (PW2) knew the property was registered in the name of the 1st appellant. The said director still authorised J22 the respondent company to go ahead with the transaction on the strength of an undated Power of Attorney, issued by only one out of the four directors of the 1st appellant company, specifically the appellant. Learned Counsel for the appellants concluded by 2nd urging us to uphold the appeal. Respondent's Arguments in Opposition to the Appeal 46. In its' heads of argument opposing the appeal the respondent on the first issue regarding the applicability of the Indoor Management Rule to the particular facts, submitted that the appellants are attempting to introduce new arguments that were never raised in the Court of Appeal. Decisions of this Court in Mususu Kalenga Building Limited and Others v Richman's Money Enterprise10 and Mumba v Lungu11 were cited in support of the submission. 4 7. That submission notwithstanding, Counsel acknowledged that the exceptions to the Indoor Management Rule, although not raised in the Court below, were ably dealt with by the Court of Appeal in its judgment. The appellant was in the said 2nd judgment found to have been at the center of the transaction for sale of the property in question. This was the basis on which the • J23 Court of Appeal acceded to the respondent's proposition of having acted in good faith and its' seeking solace in section 216 (1) (a) of the Companies Act, particularly subsection (5) which provided that: 216 (5) 'the validity of any transfer or disposition of a property to a person dealing in good faith, shall not be affected by the failure to comply with this section.' 48. Counsel submitted that the respondent acted in good faith, contrary to the appellants' contention that it did not. It was contended that this position was fortified by the evidence on record, which revealed that there was no evidence of ulterior motive or bad faith on the part of the respondent, as established by the Court of Appeal in its determination of the matter. On the various decisions cited by the appellants underscoring the exceptions to the Indoor Management Rule, the submission was simply that those decisions are distinguishable. 49. It was argued that the exceptions the appellants seek to rely on are what culminated into the enactment of sections 216 (1), (5) and 202 of the Companies Act. Learned Counsel submitted that the Court of Appeal correctly applied and was on firm ground, in finding that the appellant was acting on behalf of the 1st 2nd J24 appellant in his capacity as director, and this is the capacity in which the respondent dealt with him. 50. Against that backdrop of facts, Counsel for the respondent further argued that, it was immaterial whether or not the 2nd appellant forged documents, as according to Counsel, such forgery would not negate the contract between the 1st appellant and the respondent for the sale of the property, as the 2nd appellant was a representative of appropriate authority or standing for the class or type of transaction as decided in the case of National Airports Corporation3 . 51. Counsel concluded his submissions on ground one, by underscoring the point that, there is no evidence on record to support the application of the exceptions to the Turquand Rule. He maintained that the respondent is a bona.fide purchaser for value that paid valuable consideration for the property and had not received any adverse claims. 52. Regarding the Court of Appeal's reliance on the Kreditbank Cassel GmbH1 case, subject of ground two of the appeal, Counsel for the respondent found nothing wrong with the position taken by that Court. It was argued that the facts of the Fresh Mint Limited2 case can be distinguished from those in the present J25 appeal. The reason was that, in the latter case, the doctrine of subrogation by a guarantor is what was in issue while in the instant case, it is the sale of company land by a director to a third party. 53. According to Counsel, that is the reason the facts of the Kreditbank Cassel GmbH1 case are applicable. As held in the said case, when a certain act can be done by a company in a board meeting and there is a purported resolution authorizing it, one is not obliged to inquire whether or not there has been compliance with the internal requirements. Counsel went on to submit that the said rationale was adopted in Zambia Bata Shoe Company Limited v Vin Mas Limited, 12 where this Court's holding was that a company's authorised agents bound the company to comply with the contract and such liability cannot be avoided. 54. On the appellant's contentions that the respondent was aware of the irregularities relating to the Members' resolution and others, subject of grounds four to seven of the appeal. The respondent contended that there is no evidence on record showing that, the respondent through its director (PW2), was aware of any irregularities in the 1st appellant company 1n relation to the transaction for the sale of the property 1n question. The J26 submission was that, the absence of such evidence goes to negate the alleged lack of good faith on the part of the respondent. 55. It was further submitted that the respondent acted consistently, within the expectation of the 1st appellant company (represented by the appellant), and concluded the sale of the property on 2nd agreed terms. This was the reason that possession of the property was given to the respondent and construction works commenced with the property being now developed. Counsel argued that, the respondent had no obligation at law to contact other directors. Submissions by Counsel at the Hearing 56. When the appeal came up for hearing before us, learned Counsel for the 1st, 3rd, 4th and 5th appellants and his counterpart for the respondent, relied entirely on their heads of argument while Counsel for the 2nd appellant adopted the heads of argument of the other appellants. These were augmented briefly, with oral submissions. 57. In their oral submissions, appellants' Counsel reiterated the position that the appeal hinged on the exceptions to the Indoor Management Rule. Emphasis was placed on the negligence of the respondent, regarding the defective documents used in the transaction. Counsel faulted the Court of Appeal for having failed J27 to take those suspicious circumstances into account in reaching its decision. 58. In response, Counsel for the respondent equally maintained that the respondent acted in good faith and the exceptions to the Indoor Management Rule do not apply to this case. He underscored the point that, the allegations of fraud and negligence were never pleaded by the appellants who by raising them now, appear to be wanting to have a second bite at the cherry. We were referred to the Fresh Mint Limited2 case in support of the submission that, although the 2nd appellant did not have the requisite authority from the 1st appellant to enter into the transaction, the latter is by law still bound. Consideration of the Appeal and Decision of this Court 59. We have considered the record of appeal, heads of argument as augmented orally at the hearing, the law and various past decisions of this Court, as well as decisions from. other jurisdictions, to which we were referred by respective Counsel for the parties and for which we are indebted. From the salient facts, it is undoubtedly clear to us, that at the core of this appeal is the issue of whether, the respondent company was protected by the J28 indoor management rule and as such was not affected by any internal irregularities of the 1st appellant company, relating to the conveyancing process and the transaction for sale of the property in question, being LUS/ 12734. In particular, whether it was entitled to rely on the resolution that purportedly authorised the sale of the property without the obligation to make any further enquiries as determined by the Court of Appeal in the judgment appealed against. As a result of that position, that the respondent was a bona.fide purchaser for value as contemplated in section 216 (5) of the repealed Companies Act. The entire appeal, in our view, rests on the determination of that issue. 60. In considering the evidence on record that was led at the trial regarding the validity of the sale of the property, the High Court found that the 1st appellant company did not grant any of its directors the Power of Attorney to act on its behalf. It also found, that the 2nd appellant did not sign the contract of sale or the assignment, and whoever signed the documents, did so fraudulently. 61. The further finding was that, there was no meeting of shareholders for a proper Members' resolution to be passed, granting authority to dispose of the property. This was so, as only J29 the 2nd appellant was present at the material time, the other three shareholders having been out of jurisdiction. The High Court also found the respondent conceded, that all traceable payments that were made amounted to K192, 500.00, only. There were also payments made through cheque.s drawn in favour of the respondent that were not supported by actual proof of payment. 62. As the only person who was involved in the transaction for sale of the property, the 2nd appellant admitted to receiving some money in cash, but was adamant that the money received was with respect to a motor vehicle that he was selling. The trial court rejected this evidence and found that, whatever cash amounts were received were most likely made towards the property in issue. Nonetheless, the trial court went on to find that pictorial evidence of some payment made to the 2nd appellant at the property, was inconclusive to support the role played by the 2nd appellant in the transaction for sale. It also could not establish that he had appended his signature to all the documents in question, which assertion the 2nd appellant vehemently denied. 63. On appeal by the respondent against those findings of the High Court, the Court of Appeal considered evidence on record showing that the appellant had received various payments. It found 2nd • J30 that these payments were most likely with respect to the said property. Further, that there was also evidence on record that the appellant had applied for a Duplicate Certificate of Title in the 2nd name of the 1st appellant that was used in the transaction for sale. 64. On the basis of that evidence, the Court of Appeal concluded that the 2nd appellant had played an active role in the sale of the property. The Court of Appeal took this evidence as the reason he was present at the property in issue, as director of the 1st appellant, when money was being exchanged. Considering that all the necessary documents bore the name of the 1st appellant, the Court of Appeal concluded that the 2nd appellant had orchestrated the sale, as director of the 1st appellant company. 65. We have no issue with the Court of Appeal findings, to the extent only, that the appellant appears to have played an active role 2nd in the facilitation and sale of the 1st appellant's property in issue. This is on the basis of evidence on record which reveals that he drew up documents without the knowledge of the other three shareholders and directors, and even obtained a Duplicate Certificate of Title for the property. Our point of departure however, is that looking at the transaction for sale holistically, we note from the conveyancing documents or other related • • J31 documents and listed earlier at paragraph 10, the following irregularities: (i) The Power of Attorney authorizing the third party to act for the 1st appellant in the transaction for sale was granted by the 2nd appellant in his individual capacity. It was not stated to have been issued on behalf of the 1st appellant company. This assertion is fortified by the fact that, it had no common seal of the 1st appellant affixed. It was also not dated. (ii) The 2nd appellant denied the signatures on the contract of sale and Deed of Assignment. (iii) The Deed of Assignment, equally did not have the seals of both the 1st appellant and respondent companies, affixed, as primary parties to the transaction. (iv) Most significantly, the purported Members' resolution authorizing the sale of the property appearing at page 489 of the record, dated February, 2012 states: 4th 'this is to certify that the 'board' of Ratoyar Ltd Held A meeting on 4th February, 2012 where it was resolved to sell property No. 12734, Lusaka and wish to state that we agreed and shall have no further claim to the said property'. (boldfacing for emphasis only). (v) The only signature reflected on the said resolution is that of the 2nd appellant, although the names of all the other three directors/ shareholders who all denied being present at any such meeting, also appear on the document. (vi) The irregularities on the Special resolution appearing at page 522 of the record are even more glaring. The Special resolution states as having been purportedly, passed on 4th February, 2013 and reflects the 2nd appellant as the only member that was present at the meeting. The other three J32 directors are stated as having 'resigned' which at the trial of the matter, they all denied and asserted that they were out of the country at the material time. (vii) The special resolution further reflects that following the purported resignations, a Mr. Emmanuel Phiri was appointed as a director in the 1st appellant company. The name of the Chairperson is not disclosed and only the 2nct appellant signed the document in the capacity of Secretary. (viii) Evidence on record of a search result from PACRA in form of a computer printout dated 07.04.2012 obtained by the respondent, further reveals that the respondent was aware of the other three shareholders and directors prior to entering into the contract of sale on 21.04.2021. That knowledge notwithstanding, the respondent was apparently, not bothered to ensure that they were part of the decision authorizing the sale of the property as was required by section 216 ( 1) (a) of the applicable Companies Act. 66. Considering all those irregularities, as highlighted in paragraph 65 (i)-(viii) we are satisfied that the respondent company should have been put on alert regarding these clearly suspicious circumstances on the property being purchased. Its failure to do so can only be attributed to collusion or negligent conduct on its' part. 67. We accept that section 216 (5) of the Companies Act was enacted to protect a bona.fide third party that had dealt with the company in good faith, despite failure on the part of the company to comply with its internal formalities as by law required. All facts • J33 considered, the question then becomes, whether the respondent can be said to have acted in good faith, in light of the glaring irregularities we have pointed out. This court had occasion to consider who constitutes such a purchaser in many past decisions. In one of the more recent ones, Base Property Development Limited v Chileshe & Others13 we did hold that: , "(It is) ..... someone who buys something without notice of another's claim in the property and without actual constructive notice of any defects or infirmities, claims or equities against the seller's title; one who has in good faith, paid valuable consideration for the property without notice of prior adverse claims". (underlining for emphasis only) 68. We in the same case, went on to state that, where a purchaser is aware or should have been aware of an equitable interest, this affects their conscience and they are bound by the said interest. Those observations echoed the positions taken earlier in the case of Mwenya and Randee v Kapinga & Another14 • 69. It 1s premised on considerations of all the suspicious circumstances as identified, that we are unable to accept the proposition that the respondent acted in good faith; and as such, it was a bona.fide purchaser for value and should have the benefit of the relief contemplated in section 216 (5). • J34 70. Regarding the Indoor Management Rule under section 216 (1) (a), we agree with appellant's counsel that, where there is a decision on the same principle of law made by our courts, there is no need to rely on foreign decisions. There was therefore, no basis to rely on the old English decision of Kreditbank when we have our own authority on the same point of law as set out in the case of Freshmint and Others (1966) Limited2 . 71. According to that case, only contracts entered into on behalf of a company by an agent with authority to act in the particular type or class of transaction will bind a company. It is worthy of note that, in transactions involving disposal of company assets such as real property, captured by section 216 (1) (a) of the Companies Act (repealed) the agent was, in addition, required to be formally authorised through a Members' resolution and not a 'board resolution', as happened in this matter. 72. On the particular facts of this case, the respondent as third party had actual knowledge of the irregularities, in that the Member's resolution, read as board resolution. It is reflected as having been passed by one director, contrary to the law as stipulated in section 216 (1) (a) that required a Members' resolution, passed at a meeting of the shareholders of the company. • • J35 73. We are persuaded by the Indian decision in MRF Limited4 cited by the appellants which highlights that suspicion of irregularity is a widely recognized exception to the Indoor Management Rule, and the recent Malaysian Federal Court case, Kang Hai Holdings Sdn Bhd v Lee Lai Ban 15 It was there held that, the law imposes • a minimum duty on outsiders who seek to rely on the Turquand Rule, to at the very least, conduct minimum checks and searches to ascertain the actual position of a company and its directors. We find the glaring defect stating 'board resolution' together with the others as already highlighted in paragraph 65 (i) to (viii) bring the particular facts of the present appeal within the exceptions to the Turquand Rule in that the respondent had actual knowledge of the irregularities relating to the transaction for sale. 74. The Court of Appeal judgment is accordingly, hereby set aside. We uphold the High Court judgment that, the transaction for sale was a nullity; the Certificate of Title obtained by the respondent company should be cancelled; and the property revert to the 1st appellant. In the alternative, that the respondent pays the 1st appellant the difference between the purchase pnce of K300,000.00 and the market value that was placed at I • J36 USD 400,000.00. The amount due shall attract interest at the current dollar lending rate from the date of writ until payment in · full. 75. In view of our determination on ground one of the appeal, we find consideration of the rest of the grounds would be a mere academic exercise and otiose. 76. The 1st, 3rd, 4th and 5th appellants having substantively, succeeded on their appeal, will have their costs, both here and in the courts below. The 2nd appellant is denied costs for the role he played in the transaction for sale of the property. Appeal Allowed. J. K. Kabuka una SUPREME COURT JUDGE R JUDGE