Stanbic Bank Zambia Limited v Bruce Mwewa (SCZ/08/07/2021) (30 July 2021) – ZambiaLII

IN THE SUPREME COURT OF ZAMBIA SCZ/08/07/2021 HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: AJSPLICANT - BRUCEMWEWA RESPONDENT Before Hon. Justice Dr. Mumba Malila SC in chambers on 19th July, 2021 and 30th July, 2021. - For the Appellant: Mr. L. Mwamba - Simeza Sangwa & Associates For the Respondent: Mr. C. M. Sianondo of Malambo & Co. RULING Cases referred to: - 1. Hermanus Phillipus Steyn v. Giovanni ·G necchi - Ruscone (Civil Application No 4 of 2012) 2. Bidvest Foods Zambia Limited & 4 others v. CAA Import and Export Ltd {Appeal No 56 of 2017) 3. R. v. Secretary of State, Exp. Eastaway (2001), All ER 27 at page 23 4. Koinage Investment & Development Ltd v. Robert Nelson Ngethe (Civil Application 15 of 2012) • 5. Kekeliva Samuel Kongwa and Meamui Geargina Kongwa (SCZ/8/05/2019). 6. Chrisma Hotel v. Stanbic Bank (Selected Judgment No 6 of 2017) 7. Savenda Management Services Ltd _v. Stanbic Bank (Z) Ltd (Selected Judgment No 10 of 2018) ,_ R2 Legislation referred to: 1. Supreme Court Act, Cap 25 of the Laws of Zambia. 2. Court of Appeal Act, No. 7 of 2017 The applicant had, before the Court of Appeal, unsuccessfully challenged a decision of the High Court given in favour of the respondent. It sought leave to appeal the judgment of the Court of Appeal from that court in terms of section 13(1) of the Court of Appeal Act No 7 of 2017. That application for leave to appeal, however, met with grief as the Court of Appeal declined to grant it, stating that it neither saw any reasonable prospects of success nor any point of law of public importance in the intended appeal. T.he present application is a renewed application for leave to appeal under rule 24 (b) of the Supreme Court Rules. Briefly, the background facts were these. The respondent had entered into a finance lease agreement with the applicant relating to an automobile which was duly purchased by the applicant and availed to the respondent on lease terms. Regrettably it was involved in a road traffic accident and was written off in consequence. R3 A fresh lease agreement was arranged for the respondent by the applicant for a comparable motor vehicle. Barely two months after the fresh lease had commenced, the respondent noticed an upward adjustment in the lease payments. Upon inquiring what could have caused the upward adjustment of the monthly repayment sum, the respondent was advised that the increase was due to an amount of ZMW40,439.39 which was 16% Value Added Tax (VAT) charged on the settlement capital of ZMW252, 746.20 on the first lease. The respondent was not satisfied with the explanation given by the appellant. He thus took to making curious inquires which extended ' to the Zambia Revenue Authority (ZRA). His finding was that VAT was not chargeable on capital settlement of a finance lease upon premature termination. Having formed the firm view that the increased lease repayments, founded as they were, on the applicant's erreneous understanding that VAT was payable on capital settlement of the previous lease, was legally improper, the respondent took up the cudgles and demanded the rectification of this position which he perceived to be R4 anomolous. The applicant stayed pat on the position that VAT was payable and declined to accept the respondent's position. Was the respondent quiescent? Far from it. He took out legal action in the High Court which, in a judgment delivered by Mwenda - Zimba J, substantially upheld his claim. Befuddled by that judgment, the applicant appealed to the Court of Appeal, alleging that the High Court was wrong to have accepted the respondent's position. The Court of Appeal endorsed the judgment of the High Court and thus dismissed the appellants appeal. Equally dissatisfied with the judgment of the Court of Appeal the appellant desires to escalate its grievance to the Supreme Court. There is but one fly in the ointment: obtaining leave to appeal in obedience to section 13(1) of the Court of Appeal Act and section 24(a) of the Supreme Court Act, chapter 25 of the Laws of Zambia. The combined effect of the provisions I have referred above is that before an appeal can be launched against a judgment of the Court of Appeal, the intending appellant must apply for, and obtain leave, first before the court that made the decision sought to be appealed RS against, and in the event that such leave is not granted, by the Supreme Court following a renewed application. As I stated at the beginning of this ruling, the Court of Appeal refused to grant leave for the reason I have mentioned. Now before me is a renewed application for leave to appeal. In the supporting affidavit sworn on behalf of the applicant, the deponent, Joshua Kabwe, avers that he has been advised by his counsel that the issue raised by the appeal, that is to say, whether VAT is chargeable on the settlement capital on a finance lease agreement, is a novel issue the answer to which the appellant as well as many intending customers in the banking and financial services sector, leasing finance providers and their customers, are interested to know. This, in the view of the applicant, makes the intended appeal one that raises a point of law of public importance within the intendment of the applicable legal provisions that I have earlier referred to. Filed along with the affidavit in support, were skeleton arguments upon which Mr. Mwamba relied. There, counsel reproduced section 13(1) of the Court of Appeal Act and section 24 of the Supreme R6 l Court Act on the legal basis of the present application. Thereafter counsel zeroed in on the requirements for the grant of leave as set out in section 13(3) of the Court of Appeal Act. To the question whether the applicant has met the requirement of section 13(3) of the Court of Appeal Act, the leaned counsel submitted that it indeed has for two reasons: first that the point of law raised by the appeal is one of public importance and thus falling within section 13(3) (a). Second, that there is a compelling reason as to why the appeal should be heard and thus satisfying the requirements of section 13(3) (d). Reference was made to the Kenyan- Court of Appeal judgment in the case of Hermanus Phillipus Steyn v. Giovanni Gnecchi - Ruscone1, on the definition of a point of law of public importance, and to the Supreme Court judgment in Bidvest Foods Zambia Limited & 4 others v. CAA Import and Export Ltd2, on the point that an issue of law of public importance can quite conceivably have its genesis in a dispute between private parties. R7 According to counsel for the applicant, the question of law deemed by the applicant to be one of public importance, affects customers of banks and the financial sector generally and the Zambia Revenue Authority as the tax authority. Counsel added that this question of law of public importance occurs in ground one only of the appeal yet the other two intended grounds cannot be divorced from ground one. Counsel did not raise specific argument around section 13(3}(d) that there are other compelling for the appeal to be heard it was counsel's fervent prayer that the application be allowed. The application was streneously opposed by the respondent. An affidavit was filed in which the respondent, Bruce Mwewa, deposes that in the High Court, the Court made a finding that the applicant, was paid all the facility amount by insurance in August 2015 over the accident which occurred on 10th July, 2015. This finding of the High Court was not appealed against and therefore the issue was settled. The deponent further states that the agreement for the motor vehicle was regulated by the Vehicle and Asset Finance Interim RS Agreement. The disbursement to him, as a customer of the applicant included VAT which was paid by the applicant in procuring the vehicle before leasing it to him; that in terms of the contract if the leased asset is damaged, the parties proceeded as though a default had occurred. Mr. Mwewa also states in his affidavit, that the issue whether VAT is chargeable on capital settlement of a finance lease upon premature termination and the treatment of VAT are thoroughly provided for in various guideline's provided by the Zambia Revenue Authority. Rather than the applicant paying VAT per monthly lease instalment payment, the applicant paid VAT in advance to the Zambia Revenue Authority and when the vehicle was involved in an accident, thereby prematurely terminating the lease, the applicant wanted to impose the VAT it had paid in advance to the Zambia Revenue Authority on the respondent's account. Finally, it was averred that the proposed grounds of appeal to the Supreme Court do not disclose any prospects of success nor do .R9 they raise a point of law of public importance so as to warrant leave to be granted. There were also skeleton arguments in opposition filed by counsel for the respondent in support of its position. Mr. Sianando adopted those and intimated that he was relying on them entirely. In those skeleton arguments, having provided the background, counsel turned to arguing that the intended appeal does not satisfy the threshold for granting leave as set out in section 13 of the Court of Appeal Act. He argued - after citing the case of R. v. Secretary of State, Exp. Eastaway3- that granting leave to appeal after the introduction of the Court of Appeal should be considered in light of the statement of Lord Bingham in R. v. Secretary of State, namely that the Supreme Court must necessarily concentrate its attention on a relatively small number of cases recognised as raising legal questions of general importance. Counsel added that the filtering process for appeals to the Supreme Court should ensure that only appeals that raise issues of jurisprudential moment and not errors of application of settled law graced the highest court.' RlO Counsel also cited the decision of the Kenyan Court of Appeal in Hermanus Phillipus Steyn v. Giovanni Gnecchi-Ruscone1 for the submission that while leave to an intermediate court - for example the Court of Appeal, should be given for purposes of correcting injustices and errors of fact or law, a more stringent approach should be adopted in regard to appeals to the Supreme Court where only appeals involving matters of general insignificance should grace the court. The leaned counsel also cited another Kenyan case - that of Koinage Investment & Development Ltd v. Robert Nelson Ngethe4 to buttress the same argument. Counsel furthermore quoted a passage from the Supreme Court judgment in the case of Bidvest Foods and Others v. Import and Export Ltd2 in which the court stated that sheer novelty of a legal issue does not ipso facto make it a point pf law of public importance. It was for the forgoing reasons that Mr. Sianondo fervently prayed that the application be dismissed with costs to the respondent. I have paid very close attention to the animated arguments of counsel for both parties. The question I must address is simply Rll whether the intended appeal passes the threshold for the grant of leave to appeal as set out in section 13(3) of the court of Appeal Act. As I have intimated, the applicant believes that the point of law raised in the intended appeal, that is to say, whether VAT is chargeable on the settlement capital of a finance lease agreement, is a novel issue and one of considerable public importance. · The application is thus brought out under section 13(3) of the Court of Appeal Act which states that: a) The court may grant leave to appeal where it considers that - the appeal raises a point of law of public importance. I ask myself the question whether_ the issue regarding payment on settlement capital on finance leases constitutes a point of law of public importance. As to what amounts to a point of law of public importance, I did in a ruling I made as a single judge in the case of Kekelwa Samuel Kongwa and Meamui Geargina Kongwa5 observe that for a legal question to be treated as a point of law of public importance, it must have a public or general character rather than one that merely affects the private rights or interests of the parties to a particular dispute. That position was endorsed by the Supreme R12 Court in Bidvest Foods Zambia Ltd & Others v. CAA Import and Export Ltd2• In Bidvest, the Supreme Court observed that: Where there is a discernable public interest or public policy concern in the anticipated elucidation by the Supreme Court of a point of law in what is otherwise litigation between private parties, there is a definite possibility that such point of law would be one of public importance notwithstanding its private genesis. The question in dispute here involves two private parties ar1S1ng from a contractual arrangement between them. It also however involve the interpretation of a statutory provision relating to the charging of VAT on settlement capital of a finance lease. In Bidvest, the court went further to establish that: Points of law of public importance can, in our view, be harnessed more easily in appeals where it is demonstrably for the public or general good of the polity for the Supreme Court, as the final court, to review the legality of extraordinary questions and new legal provisions informing action by public authorities, or where a significant part of the public stands to be informed and guided by the court's interpretation so that in that sense, there is a public interest in the outcome of an appeal. Such an appeal is more likely to raise a point of law of public importance. R13 I am fully aware that to many a tax payer, the c1v1c duty to pay taxes generates much resentment, never mind the unquestionable significance of tax to the fiscus of the country. I take judicial notice that taxes that are ereneously paid to ZRA will nonetheless be accepted by the tax authorities and the process of claiming a refund or tax credit could be quite involved. Many members of the public would thus wish to be certain that payment is due before it is made. Many others are also aware that dealing with banks leaves them with very little room for negotiation. As the Supreme Court lamented in Chrisma Hotel v. Stanbic Bank6 banks have a seemingly unlimited authority to do what they wish with customers' accounts in ensuring their profitability. It is my considered view that there is in this case an interpretation issue of great interest to the of public which concerns a bank and a customer on one hand and the tax authorities on the other. And it is not a common or every day question. As the Supreme Court observed in the case of Savenda Management Services Ltd v. Stanbic Bank (Z) Ltd7 in relation to the appeal in which this court was to make a maiden pronouncement on the use of R14 credit data by bank once individuals obtained loans from financial institutions, members of the public are desires to know the fate of their credit data. The same reasoning could broadly be extended to the present dispute. More significantly, however, I have read the judgment of the High Court as well as that of the Court of Appeal on the crucial question whether VAT is chargeable on the settlement capital of a lease. The High Court, after placing its own construction on the provision of section 7(1) of the Value Added Tax Act, chapter 331 of the Laws of Zambia, found in favour of the respondent against the position taken by the applicant. The Court of Appeal, for its part, does in paragraph 45 intimate that the question whether VAT is chargeable on settlement capital and whether the respondent was under an obligation to pay VAT on it, questioned "findings of fact relating to the interpretation made by the leaned High Court Judge." I of course do not agree with the Court of Appeal that that question or the interpretation made by the. leaned Judge in the High Court was on a question of fact. It was, in fact, a question of law hence, • RlS the intended escalation to the Supreme Court. What I have to determine is whether that question of law was one of public importance. In its judgment, the Court of Appeal interpreted the prov1s1ons of the relevant lease agreement, notably clause 1.1.1 and clauses 12.3 as well as the VAT Act. In both the High Court and the Court of Appeal judgements there was no suggestion that the interpretation of the law on the question raised had been settled previously. Yet, of interest to the present application, is paragraphs 8 of the Court of Appeal judgment. It reads as follows; 8. The appellant stated that the settlement capital balance on a finance lease is chargeable of VAT and that the VAT collected from the respondent would be remitted to Zambia Revenue Authority by the appellant. The appellant averred that the respondent was paid ZWM40,439.39 on the understanding that Zambia Revenue Authority would refund the sum earlier remitted as VAT charges on finance lease capital settlement but the Authority did not refund the same. The appellant claimed the sum of ZMW40,439.39 as money that was wrongly paid to the respondent as a refund on VAT charged on the first lease capital settlement with interest and costs. As noted by the High Court in its judgment, the respondent had produced a Zambia Revenue Authority leaflet in its bundle of R16 documents indicating that termination of a lease by accident does not constitute supply of services for VAT purposes. All the circumstances taken together come to this: that VAT is not payable on capital settlement of a finance lease upon premature termination of a lease. This fact is known to ZRA, the applicant and the respondent. There is thus no dispute. The applicant paid VAT erroneously. It sought a refund from ZRA but failed to get it. It then lumped that charge on the respondent. Taken in the round, it seems to me that the misperception lay with the applicant who should not have paid the VAT to Zambia Revenue Authority had it cared to seek proper advice on the issue. Having failed to secure its refund, the applicant turned to the respondent to recover the VAT paid and, given its dominant position decided to recover the money from the respondent against all legitimate protestation by the respondent. There is no question of law of public importance deserving to be heard by this court. The explanation sought by the respondent from the tax authorities and the leaflet produced in his bundle of documents were clear. This coupled with the applicant's failed R17 attempt to secure a refund, speaks volumes about the issue sought to be raised in this appeal. Speaking for myself it would be a different situation if the appellant disagreed with the position explained by the Zambia Revenue Authority and as set out in the leaflet tendered in evide:r.!'ce in the High Court. - As I see no point of law of public importance ans1ng from the appeal, I decline the application. There shall be costs for the respondent. stice Dr. Mumba Malila, SC SUPREME COURT JUDGE