Olcint Proline Limited and Ors v Frank Nguni (APPEAL No.297/2023) (23 October 2024) – ZambiaLII

IN THE COURT OF APPEAL OF ZAMBIA APPEAL N o.297 / 2023 HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: 2 3 OCT 2C:4 OLCINT PROLINE LIMITED 1S T APPELLANT OLIVER TEMBO APPELLANT 2ND PETER MAJULA 3RD APPELLANT AND FRANK NGUNI RESPONDENT CORAM: CHASHI, MAKUNGU AND SICHINGA, JJA ON: 18th September and 23rd October, 2024 For the Appellants: K. Mulenga, Messrs J&M Advocates For the Respondent: C. M. Zulu, Messrs Linus & Partners JUDGMENT CHASHI JA, delivered the Judgment of the Court. Cases referred to: 1. Mayo Transport v United Dominions Corporation Limited (1 962) R & N R 22 2. Thynne v Thynne (1953) 3 All ER, 129 3. Philip Mhango v Dorothy Ngulube and Others (1983) ZR, 61 4. Ndongo v Moses Mulyango, Roostico Banda - SCZ Judgment No. 4 of2011 -25. Zambia National Building Society v Ernest Mukwambata Nayunda (1993) S.J 33 6. Zambia Railways Limited v Pauline S Mundia and Brian Sialumba (2008) ZR, 287 7. J Evans and Sons (Portsmouth) Limited v Andrea Merzaria (1976) 2 All ER, 930 8. King Farm Products Limited and Mwanamuto Investments Limited v Dipti Rani Sen (2008) ZR, 72 9. Nkongolo Farms Limited v Zambia National Commercial Bank and 2 Others - SCZ Appeal No. 101 of 2004 10. Masausto Wilson Zulu v Avondale Housing Project Limited (1982) ZR, 172 11. Re: Kashita - SCZ Judgment No. 27 of 1982 12. Maamba Collieries Limited v Mayford Chikoya - CAZ Appeal No. 264 of 2021 Legislation referred to: 1. The Judgments Act, Chapter 81 of the Laws of Zambia 1.0 INTRODUCTION 1. 1 The Appellant's appeal emanates from a Judgment on assessment by the Registrar of the High Court (Commercial Division), Hon. A. N. Chisanga, delivered on 30th June 2023. In the said Judgment, the Registrar found that the Respondent was entitled to indemnification by the 1st and 3rd Appellants in the sum -3of ZMW 1, 549, 340.00 representing the value of the property lost and ZMW 76, 156.02 as compensation for rental payments. 1.2 The Registrar further ordered that the total assessed sum be paid within 30 days from the date of the Judgment on Assessment, with post-judgment interest accruing at the rate of 9. 5% per annum from 7th September 2021, until full payment. 2.0 BACKGROUND 2.1 The brief background is that on 16th March 2015, the 1st Appellant obtained a loan of ZMW 1,000,000.00 from First National Bank Zambia Limited (the Bank). The Respondent provided a third-party mortgage over his dwelling house Stand No. 12275 Lusaka (the property) and personally guaranteed the repayment of the loan. 2.2 Following the Appellant's default on the loan 1st repayments, the Bank sought to enforce the mortgage. In an effort to avoid foreclosure and maximise the sale value of the property, the Respondent reached an agreement with the Bank to independently sell the property. -4Consequently, the Respondent sold the property for ZMW 1,650,000.00 and paid ZMW 1,000,000.00 to the Bank to settle the outstanding loan. 2.3 Prior to this payment, the Respondent successfully negotiated with the Bank to reduce the outstanding loan amount of ZMW 1,200,000.00 to ZMW 1,000,000.00, which was the amount the Respondent ultimately paid to the Bank. 2.4 This prompted the Respondent, on 2nd December 2020, to commence an action against the Appellants by way of writ of summons, claiming inter alia payment of the sum of ZMW 650,000.00, special damages ofZMW4, 500.00 per month, for rent incurred by the Respondent from 1st July 2020, until the conclusion of the matter, as well as damages for inconvenience, pain and turmoil. 3.0 DECISION OF THE JUDGE IN THE COURT BELOW 3.1 K. Chenda, Jin his Judgment of 6th September 2021, found that the 1st Appellant, as the defaulting borrower, was obligated to indemnify the Respondent for the loss . . . of property and any consequential 1nJunes. Furthermore, the Judge determined that the 1st -5Appellant was a sham company set up by the 2nd Appellant to conduct business and avoid obligations. As a result, the Judge deemed it appropriate to pierce the corporate veil, holding the 2nd Appellant accountable for the 1st Appellant's debt, if the 1st Appellant fails to pay and execution proves insufficient. Moreover, the Judge noted that even without piercing the veil, the 2nd Appellant would still be liable for half of the loss, as both had guaranteed the debt. 3.2 Additionally, the 3rd Appellant was found to have fraudulently misrepresented facts to the Respondent, causing him to pledge property to secure the 1st Appellant's loan under the false pretence that the financing would be used for a government contract and that the earnings would repay the loan. 3.3 Lastly, while the Judge found that the Respondent had proven he suffered injury due to the 1st Appellant's failure to meet its payment obligations to the Bank, he noted insufficient evidence regarding the exact sale price of the property, amounts remitted to the Bank and rental payments. Thus, the assessment of damages was -6referred to the Registrar, noting that the amount would be less than ZMW 350,000.00 already paid to the Respondent. 4.0 CASE AND ARGUMENTS IN THE COURT BELOW 4.1 In support of the application for assessment, the Respondent contended that he sold the property for ZMW 1,650,000.00. He asserted that the original debt to be repaid was ZMW 1,258,421.30, however, after negotiating with the bank, the debt was reduced to ZMW 1,000,000.00, which the bank accepted as a full settlement. The Respondent claimed that, as a result of the Appellants' actions, he suffered a loss of ZMW 650,000.00 from the sale of the property. This loss was calculated as the difference between the ZMW 1,000,000.00 used for debt repayment and the ZMW 350,000.00 already paid by the Appellants to the Respondent. 4.2 He additionally asserted that the learned Judge ordered the 1st and 3rd Appellants to refund the Respondent for rent payments from 1st July 2020, to the date of assessment, at ZMW 4,500.00 per month, inclusive of -7interest. The Respondent calculated the total amount owed for the property lost to the bank and the rental payments, which came to ZMW 1,416,266.13 and ZMW 84,014.42, respectively, using the interest rates directed by the learned Judge. 4.3 The Appellants opposed the application, contending that the Respondent did not provide an accurate loan account statement reflecting the payments made by the 1st Appellant. They argued that the Respondent received ZMW 60,000.00 and an additional ZMW 90,000.00 to help redeem his property, which was held as security by ZNBS for a loan obtained by the Respondent. It was contended that these payments should have been factored into the determination of the amount owed to the Respondent. 4.4 Additionally, they asserted that the Respondent voluntarily moved out of the property and sold it, incurring extra costs for alternative accommodation. Furthermore, it was argued that the Respondent did not provide adequate documentation to support the existence of a lease agreement. The only documents -8submitted to support the rental claims were unauthenticated and thus insufficient as proof. 5.0 DECISION OF THE COURT BELOW 5.1 The Registrar formulated three issues for determination: 1. Whether the issue of interest was conclusively dealt with at the trial of the main matter; 2. What amount the Respondent is entitled to recover being the value of the loss of his property less the sum ofZMW 350,000.00 and 3. What amount the Respondent was paying as rent after yielding vacant possession to the purchaser following the sale of his house. 5. 2 Regarding the first issue, the learned Registrar noted that during the Respondent's negotiations with the Bank to settle the loan, a deduction of ZMW200, 000.00 had been made, reducing the amount payable to ZMW 1,000,000.00, leaving no outstanding amount owed to the Bank. 5.3 However, the Registrar emphasised that the interest component could not be overlooked, as the trial Judge ordered interest to be paid on the amounts due. !. -9Therefore, although the interest on the loan was settled when the Respondent repaid the Bank in full, the Respondent remained entitled to interest on the amounts found due. 5.4 Regarding the second issue, the learned Registrar noted that since the trial Judge found that the Respondent had discharged the Appellants' obligation to the Bank, the remaining question was the amount the Respondent was entitled to recover for the value lost in the property after deducting the ZMW 350,000.00 already received. 5.5 The Registrar concurred with the Respondent that the value was not tied to the Appellants' payment towards the loan. Therefore, the ZMW 60,000.00 and ZMW 90,000.000 referenced by the Appellants' witness cannot be deducted from what is owed to the Respondent, as these amounts were already accounted for in the ZMW 350,000.00 paid to the Bank. 5.6 The Registrar found the Respondent's account of events credible stating that the property was valued at ZMW 1, 500,000.00 and sold for ZMW 1, 650,000.00. Further, the Bank received ZMW 1,000,000.00 as a full -10settlement of the Appellants' debt. The Respondent's account was also supported by PW2, an employee of the Bank, who confirmed the ZMW 1,000,000.00 settlement after negotiations from ZMW 1,200,000.00 and this was also corroborated by DWl and DW2. 5. 7 The Registrar determined that from the sales proceeds of ZMWl, 650,000.00, the Respondent only received the sum of ZMW 350,000.00, leaving ZMW 1,300,000.00 due to the Respondent for the property loss. 5.8 The Registrar, following the trial Judge's award of interest at the average short-term deposit rate per annum, observed that The Judgments Act1 mentions , this rate but lacks specific guidelines for its determination. She opined that short-term interest rates are usually based on three-month money market rates and that the Bank of Zambia's published Commercial Banks' Interest Rates serve as a guide for determining the applicable rate. 5.9 Considering the period from 2nd December 2020, when the matter was commenced to September 2021, when the 6 th Judgment was delivered, the Registrar determined the applicable rate at 14% per annum resulting in the interest -11of ZMW 249,340.00, which, when added to the principal sum of ZMW 1,300,000.00, brings the total amount due to ZMW 1,549,340.00. 5. 10 Coming to the third issue, the Registrar accepted the Respondent's evidence that after selling his property, he had to vacate and was paying ZMW 4,500.00 per month in rent from 1st July 2020. The Registrar found this amount reasonable for the area and was supported by the evidence of PW3, the Respondent's landlord. The Registrar found that the Respondent had proved on a balance of probabilities that he incurred rental expenses of ZMW 4,500.00 per month from 1st July 2020 to 6th September 2021, totalling about ZMW 63,900.00. 5.11 Regarding interest, which was set at the average short term deposit rate per annum, the Registrar determined the applicable rate to be 14% per annum. This resulted in interest of ZMW 12,256.02, bringing the total due amount to ZMW 76,156.02 when added to the principal sum of ZMW 63,900.00. 5.12 The Registrar ordered that the total assessed amount of ZMWl,625,496.02 (ZMW 1,549,340.00 + ZMW -1276, 156.02) be paid by the 1st and 2nd Appellants within 30 days, with post-judgment interest at 9.5% per annum from 7th September 2021 until full payment. 6.0 THE APPEAL 6. 1 Dissatisfied with the decision of the lower court, the Appellant has appealed to this Court advancing two (2) grounds of appeal couched as follows: 1. That the learned Registrar erred in law and fact when she found that the sum of ZMW 1, 625, 496.02 as the value lost as a result of the loss of the Respondent's when it had been demonstrated that the value lost was ZMW 1,000,000.00 less ZMW 350,000.00 bringing the actual figure of the value lost to ZMW 650,000.00. 2. That the learned Registrar erred in law and fact when she failed to consider all the facts on record in relation to what was paid and what was ultimately due to the Respondent. -137.0 ARGUMENTS IN SUPPORT OF THE APPEAL 7 .1 Mr. Mulenga, Counsel for the Appellant, relied on the heads of argument filed on 15th September 2023. In support of ground one, it was argued that the Judgment by the learned Registrar contains a significant error concerning the value lost by the Respondent. Specifically, the Registrar erroneously concluded that the Respondent only benefited from ZMW 350,000.00 out of the ZMW 1,650,000.00 sale of the property, leaving ZMW 1,300,000.00 as the amount owed to the Respondent. 7.2 However, the Respondent's own submissions in support of the assessment, found at page 690 of the record of appeal (the record), shows that after selling the property for ZMWl,650,000.00,he remitted ZMW 1,000,000.00 to the bank and retained ZMW 650,000.00. This directly contradicts the Registrar's finding that the Respondent only benefited from ZMW 350,000.00, which was the payment found by the trial Judge to have been made by the Appellants to the Respondent. This -14inconsistency, it was argued, indicates that the Registrar's Judgment is flawed and should be reversed. 7.3 The Appellant contended that once a judgment has been finalised, it cannot be amended or set aside except through an appeal unless specific exceptions apply. The cases of Mayo Transport v United Dominions Corporation Limited1 and Thynne v Thynne2 were cited to emphasize that errors must be addressed through an appeal, rather than by amending the judgment. It was submitted that when an error is identified in a judgment, the appropriate remedy is an appeal and if the error is proven, the appeal should succeed. 7.4 Further reliance was placed on the cases of Philip Mhango v Dorothy Ngulube and Others3 and Ndongo v Moses Mulyango and Roostico Banda4 which , establish that an appellate court will only reverse findings of fact made by a trial court if they are perverse, made without relevant evidence, based on a misapprehension of the facts, or on a proper view of the evidence, no trial court acting correctly could have -15arrived at such findings. It was argued that the Registrar's decision reflected a misapprehension of the facts, and as such, the findings should be reversed. 7.5 In support of ground two, it was argued that the learned Registrar erred by failing to fully consider all the relevant details regarding what was paid and what was ultimately owed to the Respondent. We were referred to the case of Zambia National Building Society v Ernest Mukwambata Nayunda5 where it was stated that the essence of damages is to restore the injured party to the position they would have been in, without unjust enrichment. The Appellants contended that the learned Registrar failed to apply the necessary specificity in assessing the damages owed to the Respondent, overlooking payments already made by the Appellants. 7.6 The Appellants further highlighted that the Respondent failed to provide documentary evidence to substantiate his claims for the monthly rentals, a point acknowledged by the Registrar at page 42 of the record. The Appellants argued that this lack of evidence led to speculative reasoning in the assessment of damages, -16and thus illustrating the fact that the Respondent had not proved that he is owed the amounts claimed. Several authorities were cited including the case of Zambia Railways Limited v Pauline S Mundia and Brian Sialumba,6 to emphasize that the burden of proof lies with the party asserting the claim and that courts should not make decisions based on insufficient evidence. 7. 7 The Appellants again cited the Philip Mhango case, emphasizing that courts should not make assumptions or guesses based on insufficient evidence and that any party claiming a special loss must provide clear evidence to enable the court to determine the value of that loss with. They further referred to J Evans and Sons (Portsmouth) Limited v Andrea Merzaria7 , which underscores that courts must carefully consider all evidence from start to finish to determine the agreement between the parties. 7.8 In conclusion, the Appellants argued that the learned Registrar failed to thoroughly consider the evidence in determining what was owed to the Respondent. They -17- • prayed that the Registrar's Judgment be set aside and that their appeal succeed entirely. 8.0 ARGUMENTS OPPOSING THE APPEAL 8.1 Mr. Zulu, Counsel for the Respondent, relied on the heads of argument filed on 23rd October 2023. The Appellants addressed both grounds simultaneously. However, during the hearing of the appeal, the Respondent conceded on the first ground, acknowledging that the Registrar had erred in determining that the Respondent was entitled to ZMW 1,625,496.02, when the actual value lost was ZMW 1,000,000.00 less ZMW 350,000.00, bringing the correct amount due to ZMW 650,000.00. 8.2 Coming to the second ground of appeal, the Respondent argued that the court below did not err when it determined that the only amount paid was ZMW 350,000.00 and this was also the finding of fact by the trial Judge. Counsel relied on the case of King Farm Products Limited and Mwanamuto Investments Limited v Dipti Rani Sen8 for the position that a Deputy Registrar cannot vary an order made by a Judge whether in chambers or open court. -188. 3 It was argued that the lower court arrived at her decision based on the evidence that was presented before her. Counsel relied on the cases of Nkongolo Farms Limited v Zambia National Commercial Bank and 2 Others9 and Masausto Wilson Zulu v Avondale Housing Project Limited 10 and urged the Court not to interfere with the finding of the court below. 9.0 ANALYSIS AND DECISION OF THE COURT 9.1 We have considered the impugned Judgment and the arguments advanced by Counsel for both the Appellants and the Respondent. The crux of this appeal is whether the calculation of the debt owed and the interest thereon, was correctly determined by the Registrar. 9.2 From the outset, we wish to make it clear that the Respondent has conceded to ground one of the appeal, specifically acknowledging that the Registrar erred in determining that the Appellants owed ZMW 1,300,000.00. Despite this concession, we believe it is important to provide a detailed analysis and explanation of our reasoning. This is necessary to ensure clarity, particularly regarding the circumstances under which -19- • an appellate court may interfere with the finding of the trial court as to the amount of damages. 9.3 In evaluating such cases, we are guided by well established principles articulated in several Supreme Court cases, particularly in the case of Re: Kashita 11 where the Court stated as follows: "In dealing with appeals against assessment of damages this court has frequently been guided by the principle that an appellate court should not interfere with the finding of the trial court as to the amount of damages unless it is shown that the trial court has applied a wrong principle or has misapprehended the facts or that the award was so high or so low as to be utterly unreasonable or was an entirely erroneous estimate of the damages.)) 9.4 It is not in dispute that the Appellants were in default of their loan obligations and that the Respondent intervened by settling the debt on their behalf using part of the proceeds from the sale of his property. The dispute arises from the amount claimed by the Respondent as reimbursement. -20- • 9.5 The evidence on record shows that the Respondent sold his house for ZMW 1,650,000.00. However, only ZMW 1,000,000.00 from the sale was used to repay the Appellants' loan. The balance of ZMW 650,000.00 was retained by the Respondent for his own purposes. The Registrar, however, incorrectly determined that the Appellants owed ZMW 1,300,000.00 to the Respondent, asserting that the Respondent had only received ZMW350,000.00. 9. 6 In our view, the correct approach was to consider the Respondent's actual financial outlay towards settling the debt. The Respondent expended ZMW 1,000,000.00 to clear the Appellants' loan and thus, the Appellants' liability should have been limited to that amount, less any payments already made by the Appellants. 9.7 The evidence indicates that the Appellants have already paid ZMW 350,000.00 towards discharging the debt. Therefore, the remaining balance owed by the Appellants to the Respondent is ZMW 650,000.00 (ZMW 1,000,000.00 - ZMW 350,000.00). -21- • 9.8 The Registrar's conclusion that the Appellants owed ZMW 1,300,000.00 was a clear misdirection. Reimbursing the Respondent this sum would result in unjust enrichment, as the Respondent did not expend more than ZMW 1,000,000.00 to settle the debt. 9. 9 In light of the foregoing, we find that the Appellants owe the Respondent the sum of ZMW 650,000.00, being the balance of the amount expended by the Respondent to settle the loan after accounting for the ZMW 350,000.00 already paid by the Appellants. Furthermore, interest should be calculated on the sum of ZMW 650,000.00, as this represents the actual financial loss incurred by the Respondent in settling the Appellants' debt. 9.10 Regarding the interest, we have referred to our decision in Maamba Collieries Limited v Mayford Chikoya 12 , where we provided guidance to the Honourable Registrars on assessing and calculating damages. In line with that case, we have computed the interest as follows: -22a I=PxRxT Where: I is the interest Pis the principal amount owed (ZMW 650,000.00), R is the interest rate (14%), Tis the time in days (278 days). Accordingly, the interest amounts to: I= 650,000x 14% x 278 days= ZMW 69,309.58 9.11 When this interest of ZMW 69,309.58 is added to the principal sum of ZMW 650,000.00, the total amount owed by the Appellants to the Respondent is ZMW 719,309.58. The Registrar's calculation of interest based on ZMW 1,300,000.00 was therefore erroneous and is hereb y set aside. 9.12 Regarding the second ground of appeal, which concerns whether the Registrar considered all the facts on record, we find that the Registrar did, in fact, take into account the relevant evidence. It is undisputed that the Respondent received ZMW350,000.00 from the Appellants toward the loan, a fact confirmed by the trial Judge. However, the Appellants' assertion that they • -23made additional payments of ZMW 60,000.00 and ZMW 90,000.00 to the Respondent to redeem his property with ZNBS was not supported by any credible evidence on record. Therefore, the Registrar correctly relied on the ZMW 350,000.00 as determined by the trial Judge. 9 .13 Regarding the issue of rental payments, the Respondent vacated the property following its sale. The Appellants contend that the Respondent left voluntarily, incurring additional costs in doing so. However, we hold the view that whether the Respondent vacated voluntarily or due to foreclosure is immaterial. In either scenario, the Respondent would have been required to vacate. The lease agreement, corroborated by testimony from the landlord, establishes the existence of the tenancy and the rental cost. Therefore, the Appellants' claim that the Respondent vacated voluntarily does not absolve them of their responsibility to meet the rental obligations. Consequently, the Appellants remain liable for rental payments amounting to ZMW 63,900.00. Using the -24- :.. same interest formula applied earlier, the interest on the rental amount is as follows: I= 63,900 xl4% x 278days = ZMW 6,813.66 9 .14 Adding this interest to the principal rental amount of ZMW 63,900.00 results in a total sum of ZMW 70,713.66 owed by the Appellants for the rental payments. 9.15 The Registrar's findings on the rental payments were appropriate. However, her findings on the overall amount owed were incorrect as they were equally based on a misapprehension of the facts warranting a reversal of her finding. To the extent highlighted above, we find merit in ground two of the appeal. 9.16 Furthermore, we did state in the Maamba Collieries Limited case that: "The Supreme Court has settled the position that once a judgment is given, the principal and the interest calculated at the average short-term deposit rate, merge to compnse the judgment debt. Thereafter, the judgment debt will attract interest at -25- • the current lending rate as determined by the Bank ofZ ambia." 9.17 In this case, the Judgment debt, now calculated at ZMW 790,023.24 (ZMW 719,309.58 + ZMW 70,713.66), will attract post-judgment interest at the rate of 9.5% per annum until full payment is made. 10.0 CONCLUSION 10.1 The appeal is meritorious and is accordingly allowed. J.CH I COURT OF APPEAL JUDGE . . c.K.iitKuNGJr . . A, SC COURT OF APPEAL JUDGE COURT O JUDGE