First National Bank Zambia Limited v Quatt Investments Limited and Anor (2024/HPC/0518) (16 September 2024) – ZambiaLII

/ IN THE HIGH COURT FOR ZAMB_I=-Ac:---=-:----:-==~==-----2024/HPC/0518 AT THE PRINCIPAL REGISTRY COMMERCIAL DIVISION HOLDEN AT LUSAKA (Commercial Jurisdiction) P USAKA IN THE MATTER OF AN APPLICATION UNDER ORDER 30 RULE 14 OF THE HIGH COURT RULES, CHAPTER 27 OF THE LAWS OF ZAMBIA IN THE MATTER OF FIRST LEGAL MORTGAGE OVER SUBDIVISION 15 OF SUBDIVISION 1 OF SUBDIVISION A OF FARM 1523 IN THE NAME OF QUATT M INVESTMENTS LIMITED BETWEEN: FIRST NATIONAL BANK ZAMBIA LIMITED APPLICANT AND QUATT M INVESTMENTS LIMITED 1 RESPONDENT ST ANDREW KANGWA 2ND RESPONDENT Before Hon. Justice Mr. Bonaventure C. Mbewe in Chambers Marshal Esther Nguni Research Advocate Mwiche Ntinda or the Applicant Miss. M Mayaka with Mr. A Ng'ambi In - House Counsel For the Respondent Miss. J Sipalo ofM essrs. Zambwe and Partners J1 N N JUDGMENT Pursuant to Order 30 rule 14 of the High Court Act Cases and Legislation Referred To: 1. Stanley v Wilde (1899) CA 474; 2. S Brian Musonda (Receiver of First Merchant Bank Zambia Limited (In Receivership)) v Hyper Foods Products and Others (1999) ZR 124/ SCZ Judgment No. 16 of 1999; 3. John Paul Kasengele v Zambia National Commercial Bank Plc SCZ Judgment No. 11 of 2000; 4. Avon Finance Company Limited v Bridger (1988) 2 All ER 281; 5. Madison Finance Company Limited v Philip Sinyinza, Nelson Mazembe, Ethrow Matalise Appeal No. 38 of 2015; 6. Colgate Palmolive (Z) Inc v Shemu and Others (Appeal No. 181 of 2005); 7. Chrismar Hotel Limited v Stanbic Bank Zambia Limited Appeal No. 155 of 2016; 8. Credit Africa Bank Limited (In Liquidation) v John Dingani Mudenda (2003) ZR 7; 9. Chilola Intertrade and Others v Citizens Economic Empowerment Commission CAZ Appeal No. 282/2022; 1 0. Lukasu Properties Limited v African Banking Corporation Zambia Ltd SCZ/ 08/10/2023; 11. Indo Zambia Bank Limited v Leonard Mwelwa Witika and Others Selected Judgment No. 16 of 2018; 12. Kanjala Hills Lodge Limited and Jayetileke v Stanbic Bank Zambia Limited - SCZ Judgment No. 17 of 2012; 13. Courtyard Hotels Limited and 3 Others v First National Bank Zambia Limited and Another - SCZ Appeal No. 006/ 2015; 14. Reeves Malambo v Patco Agro Industries Limited - SCZ Judgment No. 20 of 2007; 15. Paulsen and Another v. Slip Knot Investments 777 (Pty) Ltd - 2015 (3) SA 479 (C.C); 1 6. Credit Africa Bank Limited v George K Kalunga and Terry Simwanza SCZ Appeal No. 144/ 1997; 17. Zambia National Commercial Bank Plc v Brebner Changala Investments Limited and Brebner Changala (Sued as Guarantor and Mortgagor) 2015/HPC/0265; 18. Jimmy Kalunga, Kalumbe Enterprises Limited v. Stanbic Bank Zambia Limited - Appeal no. 60/ 201 7; Legislation and Other Authorities: 1. The High Court Act, Chapter 27 of the Laws of Zambia; 2. The Rules of the Supreme Court of England (White Book) 1999 Edition, Volume 1.; 3. The Lands and Deeds Registry Act Chapter of the Laws ofZ ambia; 4. Statutory Instrument No. 31 of 2020 the Banking and Financial Services (Classification and Provisioning of Loans) Directives 2020; 5. Statutory Instrument No. 142 of 1996, the Banking and Financial Services (Classification and Provisioning of Loans) Regulations 1996; 6. Halsbury's Laws of England, 4th Edition, Volume 32, Butterworth, London; 7. Land Law in Zambia, Cases and Material by, Frederick S Mudenda, UNZA Press, 2007; 8. Megarry and Wade: The Law of Real Property, 7th edition, London Sweet & Maxwell, 2008; 9. Roy Goode on Commercial Law, 4th Edition (2004) Lexis Nexis; 10. Law Reform (Miscellaneous Provision) Act, Chapter 74 of the Laws ofZ ambia; 11. Judgment Act, Chapter 81 of the Laws of Zambia. Introduction and Background [1] The Applicant herein, First National Bank Zambia Limited, commenced this action by Originating Summons on 19th July, 2024, against Quatt M Investments Limited as 1st Respondent and one Andrew Kangwa as 2nd Respondent. The application is supported by an Affidavit and a List of Authorities and Skeleton Arguments, all of even date. [2] The Applicant seeks the following reliefs as endorsed 1n the Originating Summons; i. Payment of all monies which as at 9th July, 2024, stood at ZMW3, 385, 646.01 plus contractual interest, costs and all other charges due and owing to the Applicant Bank by the 1st Respondent under Credit Facilities availed to the 1st Respondent and secured by a First Legal Mortgage over Subdivision 15 of Subdivision 1 Subdivision A of Farm No. 1523; An order of foreclosure and sale by the Applicant of ll. the Mortgaged properties; Delivery up of vacant possession of the Mortgaged Ill. Properties by the Respondent to the Applicant; iv. Payment by the 2nd Respondent of the full amount owing under the Deed of Suretyship; v. Costs; and. vi. Further or other relief the Court may deem fit. [3] The 1st and 2nd Respondents filed an affidavit in opposition to the Applicant's application on 2nd September, 2024, supported by skeleton arguments and list of documents. [4] The Applicant filed an affidavit in reply to the Respondents' opposition on 9th September, 2024. ARGUMENTS AND EVIDENCE Applicants Arguments and Submissions [5] The Affidavit in Support of the Originating Summons is deposed to by one Felix Mutiti, Residual Book Manager in the ~ ~ JS Applicant financial institution, whose affidavit attests that on 11th August, 2022, the Applicant granted the 1st Respondent a Term Loan for the sum of ZMW2, 800, 000.00 with interest charged thereon on a Nominal Annual Compounded Monthly basis at an interest rate of 22% on the contractual date. [6] The 2nd Respondent executed an unlimited letter of suretyship in favour of the Applicant on 20th October, 2020, and the said loan facility was secured by a First legal Mortgage over Subdivision 15 of Subdivision 1 Subdivision A of Farm No. 1523, Copperbelt. [7] The Applicant's affidavit, attests that the conduct of the 1st Respondent's loan account has not been to the Applicant's satisfaction as the 1st Respondent has continuously failed to meet its monthly repayment obligations. The Affidavit attests further, that it has sent the 1st Respondent reminders and the loan became non-performing on 2nd November, 2023. It has sent the 1st Respondent a final demand and reminder requesting payment of the outstanding debt. [8] The outstanding sum due as at 9th July, 2024 is ZMW3, 385, 646.01, with the principal sum owed being ZMW2, 762, 411.75, and interest being ZMW623, 234.26. That the 1st Respondent does not dispute the claim and has admitted the debt due in writing making proposals on how it would proceed to settle the debt by letter dated 12th January, 2024. [9] The Applicant has exhibited various documents referred to above in its affidavit. [ 1 O] The Applicant's skeleton arguments rely on Order 30, Rule 14 of the High Court Rules, Chapter 27 of the Laws of Zambia. The Applicant argues that a valid mortgage was created between the parties, citing the definition of a mortgage in Stanley v Wilde (1899 I) CA 474, and also Halsbury's Laws of England 4th Edition, Vol. 32, Butterworth at paragraph 402. [ 11] The Applicant submits that it is entitled to the reliefs afforded by Order 30 rule 14 of the High Court Rules. The Applicant argues that the consequence of default entitles a mortgagee to the remedies stated in the case of S Brian Musonda (Receiver of First Merchant Bank Zambia Limited (In Receivership)) v Hyper Foods Products and Two Others (2), namely foreclosure, sale, appointment of a receiver and possession. The learned treatise by Frederick Mudenda, Land Law in Zambia, Cases and Materials, UNZA Press, 2007, is said to quote from Megarry and Wade: The Law of Real Property, 7th Edition, London Sweet and Maxwell, 2008, in relation to a mortgagee's remedies. The Applicant quotes the case of John Paul Kasengele v Zambia National Commercial Bank Pie (3), which states that; " .... inability to pay has never been and is not a defence to a claim. Neither is it a bar to entering judgment in favour of a successful litigant." [12] The Applicant's skeleton arguments also argue the law of guarantee and suretyship quoting Roy Goode on Commercial Law, 4th Edition (2004) Lexis Nexis p799 who defines the characteristics of a suretyship guarantee as an undertaking to answer for another's default and that a guarantor can be sued after default by the principal. The Applicant relies on the case of Avon Finance Company Limited v Bridger (4), quoting Lord Denning as stating that; "Now let me say at once that in the vast majority of cases a customer who signs a bank guarantee or a chare cannot get out of it. No bargain will be upset which is a result of the ordinary interplay of forces. Take the case of a borrower in urgent need of money. He borrows it from the bank at high interest and a friend guarantees it. The guarantor gives his bond and gets nothing in return. The common law will not interfere. [13] The Supreme Court is also cited in the case of Madison Finance Company Limited v Philip Sinyinza, Nelson Mazembe, Ethrow Matalise (5), where the Court stated as follows; "As regards the 3rd respondent, we find that he is liable to pay the sum of KS0, 000 being the principal sum advanced. ... and interest at the agreed rate as adjudged by the court below because the 3rd Respondent guaranteed to pay this sum in the event that the 1st Respondent defaulted or failed to pay. The 1st Respondent in this case defaulted or failed to pay and so as endorsed in the guarantee document which the 3rd Respondent executed in favour of the appellant, the 3rd Defendant must pay." [ 14] The Applicant refers to Clause 1 of the Deed of Suretyship executed by the 2nd Respondent, being the exhibit "FM2", by which he guaranteed payment of the 1st Respondent's loan the subject of the claim by the Applicant. That demand has been made to the 1st Respondent who has defaulted and neglected to repay the loan. Respondents' Arguments and Submissions [15] The 1st and 2nd Respondents, filed an affidavit in opposition and skeleton arguments. The affidavit of Andrew Kangwa, the 2nd Respondent, deposes that his understanding on the interest payable on the loan was one of simple interest and posits that the Facility Agreement does not state that interest would be compounded. [16] The Affidavit argues that the Respondents dispute owing ZMW3 385 646.01, as the Applicant bank continued charging interest on the loan even after his account was classified as non performing in November, 2023. [ 1 7] The Respondents posit that he has not neglected to settle the indebtedness and continues to service the loan. That the Respondents communicated the various challenges affecting their business and sought the indulgence of the Applicant to restructure the loan as shown by the exhibit "AKl" [ 18] The Respondents' skeleton arguments and list of authorities of even date as the affidavit in opposition, posit that freedom to contract was upheld in Colgate Palmolive (Z) Inc v Shemu and Others (6); "If there is one thing more than another which public policy requires it is that men of full age and competent understanding shall have the utmost liberty in contracting and their contract when entered into freely and voluntarily shall be enforced by Courts of Justice." [ 19] The Respondents go on to argue that the Courts have pronounced on the issue of interest and charges applicable to loans given out to customers that the customer ought to be JlO rv ,v made aware and fully understand the terms imposed on them in the case of Chrismar Hotel Limited v Stanbic Bank Zambia Limited (7), where the Court stated as follows; "When there is a new arrangement and a customer has signed the application, then obviously he is bound, but when the bank wishes for it sown reasons to impose a new term on the banker customer contract, it must do so in such a way as to leave no possible doubt, and it cannot do so unilaterally. The bank's duty in this regard is fourfold; a) To advise the customer of the new term; b) To ensure that the advice is received by the customer; c) To ensure that the customer understands the consequences of failure to comply with whatever he is asked to do; and d) That the bank will not be responsible if he fails to." [20] The Respondents also cites the case of Credit Africa Bank Limited (In Liquidation) v John Dingani Mudenda (8), that; "The charging of compound interest can only be sustained if there is express agreement between the parties to the charging of compound interest or if there is evidence of consent or acquiescence to the same." ~ ~ J11 [21] The Respondent's skeleton arguments posit that the Applicant charged the Respondents compound interest without any prior agreement, which action is illegal. [22] The Respondents argue that the 1st Respondent's loan was non performing under Section 110 of the Banking and Financial Services Act No. 7 of 201, which provides as follows on the charging of interest on a non-performing loan; "A financial services provider shall recover the following amounts from a borrower on a non performing credit facility; (a) The principal amount owing when the credit facility becomes non-performing; (b) Any interest in arrears due in accordance with the credit facility agreement but not exceeding the principal amount owing when the loan becomes non-performing; and (c) Expenses incurred in the recovery of amounts owed by the borrower." The Respondents state that Section 2 of the Banking and Financial Services Act No. of 2017, defines non-performing as; "Non-performing means a loan where the principal or interest is in arrears for more than ninety days" ~ ~ J12 [23] The Respondent argues that the continued charging of interest on the loan classified as non-performing loan is illegal and any interest that has accrued after the loan became non-performing must be reversed in computing the aggregate amount owed by the Respondents, placing reliance on the case of Chilola Intertrade and Others v Citizens Economic Empowerment Commission (9), wherein the Court of Appeal held that; "Interest contractually agreed is allowed on the principal of a loan from the date of the loan until the date became non-performing." Applicant's Arguments and Submissions in Opposition _[24] The Applicant filed an affidavit and skeleton arguments in reply to the Respondents' opposition on 9th September, 2024. [25] The affidavit of Felix Mutiti deposes that Clause 4.3 of the Applicant's General Conditions contained in exhibit "FMl" clearly provides for the charging of compound interest. [27] The skeleton arguments in support argue that the rules of statutory interpretation provide that if a statute 1s unambiguous, the words of the statute bind everyone to apply them without adding or taking away anything. That the Supreme Court held thus in Lukasu Properties Limited v African Banking Corporation Zambia Ltd (10). The Applicant argues that the ordinary and plain meaning of Section 110 of ~ ~ J13 the Banking and Financial Services Act at Clause 1 (b), provides for interest on non-performing loans albeit with a caveat, which is that a financial services provider shall recover any interest in arrears due in accordance with the credit facility agreement but not exceeding the principal amount owing when the loan becomes non-performing. That this allows charging of interest on a non-performing loan and only limits how much can be charged which is that interest cannot exceed the principal amount of owed. [28] That in the case of lndo Zambia Bank Limited v . Leonard Mwelwa Witika and Others (11), the Supreme Court guided on the effect of the Banking and Financial Services (Classification and Provisioning of Loans) Regulations, 1996, which interpret section 110 of Act, when it held that, a non-performing loan does not suspend the obligations under the loan and interest is still payable until the loan has been paid on the agreed terms. That the Court further stated that suspending the payment of interest on a non-performing loan would be bad business for banks as all loanees would default in order not to pay interest. [29] That the case of Chilola Intertrade v Citizens Economic Empowerment Commission (9), cited by the Respondents misinterprets the provisions of Section 110 of the BFSA and the Court of Appeal in the said case did not deliberate on the Indo Zambia v Witika case (11), and thus deviates from the Supreme Court decision, a decision from a superior court. The ~ J14~ Applicant submits that it is both contractually and legally entitled to continue charging interest when the Respondents' account became non-performing and that the amount claimed does not exceed the principal amounts owed by the Respondents when their account became non-performing. HEARING [30) At the hearing, the Applicant's Counsel, Mr. Ng'ambi relied on the documents filed in support of the application. He pointed out that Clause 4.3 at page 4 of the Applicant's General Conditions contained in exhibit "FM l" clearly provides for the charging of compound interest. [31) Counsel for the Respondents Ms. Sipalo relied on the Respondents' affidavit in opposition and skeleton arguments. She informed the Court that the 1st and 2nd Respondents had reached out to the Applicant to propose an ex curia settlement. [32) Counsel for the Applicant objected to the last submission by Counsel for the Respondents, which she argued amounted to submitting at the bar as the arguments were not canvassed in the Respondents affidavit and skeleton arguments 1n opposition. [33) The Court sustained the objection. ~ ~ JlS JUDGMENT [34] I have carefully considered the Applicant's Affidavit in Support of Originating Summons, Skeleton Arguments and List of Authorities as well as the documents in reply. I have also carefully considered the Respondent's Affidavit in Opposition. [35] I find that this Court has jurisdiction to hear the Applicant's application under Order 30, Rule 14 of the High Court Act, Chapter 27 of the Laws of Zambia as read with Order 88 of the Rules of the Supreme Court of England (White Book) 1999 Edition, Volume 1. Order 30, Rule 14 reads; "Any mortgagee or mortgagor, whether legal or equitable, or any person entitled to or having property subject to a legal or equitable charge, or any person having the right to foreclosure or redeem any mortgage, whether legal or equitable, may take out as of course an originating summons, returnable in chambers of a Judge for such relief or the nature or kind following as may by the summons be specified, and as the circumstances of the case may require; that is to say - Payment of moneys secured by the mortgage or charge; Sale; Foreclosure; Delivery of possession (whether before or after foreclosure) to the mortgagee or person entitled to the charge by the mortgagor or person having the property subject to the charge or by any other person in, or alleged to be in possession of the property; Redemption; Reconveyance; Delivery of possession by the mortgagee." [36] The law on mortgage actions, is that the Applicant, as holder of a legal mortgage over the Respondent's property, has the right to claim all the reliefs available to it under Order 30, Rule 14 above. This was confirmed by the Supreme Court in the cases of Kanjala Hills Lodge Limited and Jayetileke v Stanbic Bank Zambia Limited (12), Courtyard Hotels Limited and Three Others v First National Bank Zambia Limited and Another (13) and Reeves Malambo v Patco Agro Industries Limited (14). [37] The 1st Respondent herein does not deny obtaining the loan from the Applicant and neither does the 2nd Respondent deny guaranteeing the repayment of the said loan. The Respondents do not expressly admit default in repayments, but argue having made some payments towards their indebtedness and posit they experienced difficulties in the business and sought to restructure the loan facility. The evidence on record contained in the account statement exhibited as "FMS" by the Applicant gives a detailed breakdown of all payments into and out of the account as well as all missed repayments and the column "balance" shows clearly the growing overdue amount arising from interest and missed repayments over the years. The Respondents have not shown any evidence of what repayments they made over the years or ever challenging the interest or seeking clarification on their obligations. Their exhibit "AKI" admits indebtedness and appears to be an attempt to explain their challenges and asking for an accommodation of the repayment amount. [38] It is not in dispute that the Respondents do owe the Applicant as the affidavit in opposition does not dispute that the loan was advanced. The issues remaining for the Court to decide on are; Whether compound interest and not simple interest is 1. chargeable on the 1st Respondent's loan; Whether there is any merit in the argument that the 11. Applicant should have stopped charging interest on the loan when the loan was classified or put on accrual status in accordance with Statutory Instrument No. 31 of 2020; and Whether this is a proper case for this Court to enter 111. judgment for the Applicant as prayed, owing to default by the Respondents in repaying their loan obligations. ~ ~ J18 [39] The Respondents argue that the 1st Respondent was charge d compound interest on its loan contrary to the provisions of the agreement and the law. I believe that this argument is misconceived as the Applicant has demonstrated to my satisfaction that Clause 4.3 of the Applicant's General Conditions contained in exhibit "FM l" clearly provides for the charging of compound interest. I therefore dismiss this argument by the Respondents. [40] The Respondents do actually admit default on their payment obligations to the Applicant by arguing that the Applicant should have stopped charging interest to their loan account during the period of default and the loan being classified relying on Section 110 of the Banking and Financial Services Act. [41] The Applicant has rebutted the Respondents' argument, that the effect of Section 110 ( 1) of the Banking and Financial Services Act is to restrict the amount of interest that the Applicant can claim by arguing that the true interpretation of Section 110 is to restrict the Applicant from claiming no more that 100% of the principal loan. [42] I agree with the Applicant's arguments and interpretation of the true construction and interpretation of Section 110, which is what is called the "in duplum" rule that applies to various jurisdictions including South African. "In duplum" simply means "double the amount", and the rule as now provided under "'J19"' Section 110 (1) (b) of the Banking and Financial Services Act is that interest on a loan will cease to run when the total amount of interest arrears accrues to an amount equal to the outstanding principal indebtedness. This section has introduced this rule to financial transactions in our jurisdiction and is a form of protection of the borrowing public from onerous obligations in their borrowing. [43] I do not agree with the Respondents' arguments and interpretation that Section 110 ( 1) (b) obliges a lender to stop charging interest upon a loan being classified as non performing. It does not state that a lender shall not recover any interest or shall suspend interest upon classifying or putting a loan in accrual status. The Respondents have not persuaded me to agree with their arguments and submissions on this point. [44] To explain what Section 110 (1) (b) is about, I take guidance from the South African case of Paulsen and Another v. Slip Knot Investments 777 (Pty) Ltd (15), in which case, the South African Constitutional Court held, upholding the Supreme Court of Appeal holding, that interest runs anew from the date that the judgment debt is due and payable. Post judgment interest is therefore limited to an amount equal to the whole of the judgment debt. This was in determining the questions of whether post-judgment interest runs on the whole of the judgment debt or only on the original capital amount of the loan; And whether the in duplum rule caps the running of such ~ ~ J20 additional interest at double the sum of the whole judgment debt or double the sum of the original capital amount of the loan. In the matter in casu, the Respondents have not demonstrated the basis of the argument by showing what quantum of interest has been demanded or paid that is excess of 100% of the principal amount. I therefore do not find that there is any credence in the Respondents' argument on Section 110 (1) (b) of the Banking and Financial Services Act. [45] The argument posited by the Respondents that they should not be charged interest from the time the loan was classified or put on accrual status, begs the question whether Section 2 of the BFSA and Section 110 should be read in isolation of the Regulations or directives issued under the Act. The principal Act, in my judgment, should be read together with the subsidiary legislation which provides more detail on the concept and application of non-performing, non-accrual or classified loans, which in this case is the Banking and Financial Services (Classification and Provisioning of Loans) Directives of 2020 Statutory Instrument 31 of 2020. This Directive-re-enacted the Banking and Financial Services (Classification and Provisioning of Loans) Regulations, Statutory Instrument No, 142 of 1996. The Supreme Court in the case of lndo Zambia Bank Limited v Leonard Witika and Others ( 11 ), took time to address the question of whether a borrower is absolved from paying interest when their loan is put in non-performing or non-accrual status and referred to the ~ ~ J21 reasoning in its Judgment in the case of Credit Africa Bank Limited v George K. Kalunga and Terry Simwanza (16), quoting extensively from Chirwa J at pages P3 and P4. It went on to hold that; "Similarly in the present case, the fact that the 1st respondent's debt had been put in a non-performing or non-accrual status did not suspend his obligations to pay interest under the loan agreement. It must be emphatically stated that contrary to the flawed reasoning of the trial judge, Statutory Instrument No. 142 of 1996 was never intended to be the magic wand in the hands of defaulting litigants. We agree with Mr. Pindani that allowing the reasoning of the trial judge to prevail would encourage customers of banks to deliberately default so that they do not pay interest. Without doubt, this is not what Statutory Instrument No. 142 of 1996 was envisaged to achieve. We therefore, find merit in ground five." The Supreme Court in the above cases looked at both the principal Act as well as the relevant accompanying subsidiary legislation. [46] The Judgment of this Court, when one examines the early cases, wherein this Court interpreted the issue of borrowers from financial institutions demanding that the lenders freeze or stop charging the contracted interest after default, in the case ~ ~ J22 ,I of Zambia National Commercial Bank Pie v Brebner Changala Investments Limited and Brebner Changala (Sued as Guarantor and Mortgagor) ( 17), the Court addressed the issue of non-accrual loans or non-accrual status which is also referred to as non-performing or classified loans. In Part III of Statutory Instrument 31 of 2020, under the sub-heading Determination and Treatment of Non-accrual Loans and Related Accounts, one finds that the provisions contained in Section 9 of the 2020 Directives, are identical to provisions in Regulation 14 of Banking and Financial Services (Classification and Provisioning of Loans) Regulations, Statutory Instrument 142 of 1996. [47] I quote my brother Honourable Mr. Justice W. S. Mweemba in Zambia National Commercial Bank Pie v Brebner Changala Investments Limited and Brebner Changala (Sued as Guarantor and Mortgagor) ( 17), which cites the cases of Prudence Bank Limited v Noda Investments Limited (18); and the Supreme Court holding in Credit Africa Bank Limited v George K. Kalunga and Terry Simwanza (16), in order to answer definitely, the Respondents' belief that there is actually a law which affords borrowers the luxury of benefiting from a suspension or reduced interest payments when they default in repayment of loans. Mweemba J stated that; "I cannot agree more with the observations of Honourable Justice P. Chitengi. Bank interest is still chargeable on non-accrual loans as the placing of a J23 N N loan on non-accrual status does not abrogate the borrowers' obligations under a loan agreement to pay interest. However, accrued but uncollected interest cannot be shown by a bank in its financial statements to the shareholders and to the Central Bank as income." [48] The Respondents' in buttressing their arguments have relied on the case of Chilola Intertrade v Citizens Economic Empowerment Commission (9), which case the Applicants have argued and contrasted very well in the skeleton arguments in reply, as having being decided against the spirit of the prevailing Judgment of the Supreme Court on the matter and therefore bad law and should not be followed by this Court in so far as it appears to overturn the Supreme Court decision in lndo Zambia Bank Limited v Leonard Mwelwa Witika and Others (11). [49] The Court of Appeal in Chilola Intertrade v Leonard Witika (9), when referring to Section 110 and Section 2 of the BFSA, states; "6.24 A reading of these provisions shows that interest may only be charged on a non-performing loan when the principal and/ or interest has not been in arrears for more than 90 days. This means once there is default in repaying the loan for more than 90 days, that loan is deemed to be non-performing and the lender may ""J24~ recover the principal amount owing when the credit facility becomes non-performing and any interest in arrears due in accordance with the agreement, but not exceeding the principal mount owing when the loan becomes non-performing. The effect of the provision being the proscribing of the charging of interest on non-performing loans and that the interest due should not exceed the principal amount owing at the time the loan becomes non-performing. 6.28 Interest contractually agreed is allowed on the principal from the date of the loan until the date the facility became non-performing three months after_t he expiry of the loan facility namely July, 2015. Thereafter, the respondent was entitled to repayment of the sum of K2, 000, 000.00 plus interest at 12% until July, 2015. 6.29 We therefore find merit in ground 4 and order that the principal and interest outstanding be assessed by the Registrar and that interest found due should not exceed the principal amount owing when the loan became non-performing." [50] The error that the Court of Appeal fell into in the Chilola case (9) at paragraph 6.24, is that it red into section 110, words or a meaning which is not intended or conveyed by a simple reading thereof. It must be noted that the said section carries no punctuation mark to separate charging of interest and the capping the interest at an amount exceeding the principal amount owing. It reads; (b) Any interest in arrears due in accordance with the credit facility agreement but not exceeding the principal amount owing when the loan becomes non performing; [51] Thus the holding by the Court of Appeal that; " ...T he effect of the provision being the proscribing of the charging of interest on non-performing loans" is a fallacy as this conclusion is not drawn from the provisions of the law contained in Section 110 (1) (b). It is therefore my conclusion that the Applicant herein is allowed to charge and claim interest on the loan in default even after it was classified as non-performing. [52] I have also duly considered that the 1st Respondent by letter dated 12th January, 2024, exhibited as "AKl" does not dispute the claim and has admitted the debt due in writing making proposals on how it would proceed to settle the debt. This to me raises the question of whether this is a proper case for me to enter judgment on admission against the 1st Respondent. The Applicant having proved its case against the respondents on a balance of probabilities, it may not be necessary to also enter judgment on admission against the 1st Respondent. ~ J26~ [53] Upon considering of all the circumstances of the matter and from the evidence adduced, I find that the law supports that this is a proper case for me to enter Judgment in favour of the Applicant, which I hereby do, as prayed. I hereby enter Judgment for the Applicant, in the sum of ZMW3, 385, 646.01 plus contractual interest from the date of commencement of the action to the date of Judgment in accordance with Section 4 of the Law Reform (Miscellaneous Provision) Act, Chapter 74 of the Laws of Zambia. Thereafter at the Judgment Act, Chapter 81 of the Laws of Zambia rate to the date of full payment; and [54] The Respondent shall settle the Debt within 120 days from the date of the Judgment. In default, the Applicant shall be at liberty to foreclose, take vacant possession of and sell the mortgaged property known as Subdivision 15 of Subdivision 1 Subdivision A of Farm No. 1523, Copperbelt. (55] The Applicant is hereby granted leave to execute against the 2nd Respondent on his suretyship/ guarantee, in the event that the amount recovered from the sale of the mortgaged property is not sufficient to settle this Judgment in full, without further recourse to the Court. [56] I award costs of and incidental to the action to the Applicant, to be taxed in default of agreement. ~ ~ J27 [57] Leave to appeal is hereby granted. Delivered at Lusaka this 16th day of September, 2024. Bonaventure C Mbewe C\~~'( uR1 HIGH COURT JUD .\UO\ \-'\\G\-'\ . ~ o· . . «\etc\ __ ' cot'<\'" --- _, :,;,..,r ~ . ,' C: ~ ~ J28