Zambia National Building Society v Clement Samboko (2023/HPC/0820) (23 February 2024) – ZambiaLII

IN THE HIGH COURT FOR ZAMBIA 2023/HPC/0820 AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (Civil J urisdiction) IN THE MATTER OF: AN APPLICATION UNDER ORDER XXX RULE 14 OF THE HIGH COURT RULES, CHAPTER 27 OF THE LAWS OF ZAMBIA. IN THE MATTER OF: AN EQUITABLE MORTGAGE OVER SUBDMSION No. A703 OF SUBDIVISION F OF • STAND No. 34872, LUSAKA • IN THE MATTER OF: AN APPLICATION FOR AN ORDER OF FORECLOSURE AND THE CONVEYANCE OF SUBDIVISION No. A703 OF SUBDIVISION F OF STAND No. 34872 TO THE APPLICANT. BETWEEN: LlCOF URTOF JUDICIARY ZAMBIA NATIONAL BUILDING SO PLICANT 2 3 FEB 2024 AND COMMERCIAL REGISTRY CLEMENT SAMBOKO o~ p · o. Box soo67 t.\.\S~~ • Before Honourable Lady Justice Chilombo Bridget Maka For the Applicant: Ms. M. L Nkonde - Messrs Mweshi Banda and Associates. For the Respondent: Mr. A. Tembo - Messrs Tembo, Ngulube and Associates. JUDGMENT Legislation Refe rred to: 1. The High Court Rules, Chapter 27 of the Laws of Zambia. 2. The Rules of the Supreme Court of England 1999 Edition(White Book). 3. The Lands and Deeds Registry Act, Chapter 185 of the Laws of Zambia. Cases Referred to: 1. Magic Carpet Travel and Tours vs. Zambia National Commercial Bank Limited (1999) Z.R, 61. • 2. Lackson Mwabi Mwanza vs. Sangwa Simpasa Chisha and Lawrence Simpasa (2011) 1 Z.R, 436. 3. Cavmont Bank Limited vs. Cereal Millers anf Farms Limited and Others Appeal No. 277 of 2021. 4. S. Brian Musonda (Receiver of First Merchant Bank Zambia Limited (In Receivership) vs. Hyper Food Products Limited, Tony's Hypermarket Limited and Creation One Trading Zambia Limited (1999) Z.R, 124 (SC). 5. Kasabi Industries Limited vs. lntermarket Banking Corporation Limited Appeal No. 168 / 2009. 6. National Drug Company Limited and Zambia Privatisation Agency vs. • Mary Katongo SCZ Appeal No. 79/2001. Other Works Referred to: 1. Fisher and Lightwood's Law of Mortgage 13th Edition 2. Coote's Treatise on the Law of Mortgages, 9th Edition, Richard Holmes Coote, Volume 1, 1927. 1. Introduction. 1.1. On 24th November, 2023, the Applicant commenced this action by way of Originating Summons. The Originating J2 Summons was supported by an affidavit and skeleton arguments. 1.2. The reliefs being sought by the Applicant are as follows:- i. Payment of all monies due to the applicant under the respective covenants in the mortgage which as at the date hereof stands at K661J606.12 together with all accruing • interest until final payment. ii. An Order that the Respondent absolutely and unequivocally conveys to the Applicant the mortgaged property namely Subdivision No. A7 03 of Subdivision F of Stand No. 34872 situate at Lusaka in the Lusaka Province of the Republic of Zambia; and iii. Costs of execution; iv. Any other or further relief that the Court may deem fit. 1.3. The Respondent did not enter appearance, neither did he • file an affidavit in opposition and skeleton arguments . 2. Applicant's Affidavit in Support. 2 .1 . The Applicant's affidavit in support of Originating Summons was deposed by Michael Fumbani Nyirenda, a Manager Collections and Recoveries in the Applicant company. 2.2. His evidence was that the Applicant and the Respondent executed a Mortgage Deed through which property known J3 as Stand No. 34872/F/ A7 03, Lusaka(the property) registered in the name of the National Pension Scheme Authority(NAPSA) was demised to the Applicant as security for the repayment of a loan in the sum of K575,000.00 advanced to the Respondent. A copy of the mortgage deed and certificate of title in the name ofNAPSA were produced and marked "MFNl " and "MFN2" respectively. • 2.3. It was averred that the loan advanced to the Respondent was for purposes of purchasing the property as indicated in a copy of the Mortgage Application Form dated 17th April, 2018 marked ''MFN3". It was therefore agreed that the loan sum would be directly disbursed to NAPSA. A copy of a letter to this effect from the Applicant to the Responded was produced as exhibit "MFN4". 2.4. It was further deposed that the Respondent was m possession of the property and its conveyance was • underway in that the Contract of Sale and Deed of Assignment had been executed by NAPSA and the Respondent, and the Property Transfer Tax Exemption Certain duly obtained by NAPSA. Copies the Contract of Sale, Deed of Assignment and Property Transfer Tax Exemption Certificate were produced and marked "MFN5'>, "MFN6'' and "MFN7'' respectively. 2.5. That it was a term of the Mortgage Deed that the Respondent would duly and punctually repay the principal J4 with interest at the rate and frequency specified in the schedule to the mortgage and all other monies due as per the Rules and Regulations of the Applicant or under the mortgage. It was also agreed that in the event of default in a month's payment by the Respondent, the whole outstanding balance of the principal and interest thereon would immediately become due and payable. 2 .6. Further agreed was that a certificate of the Applicant's • auditor would constitute prima facie proof of the state of account of the Respondent relating to the mortgage. 2.7. That on 28th June, 2018, the Applicant disbursed the loan advance to the Respondent. On 5th March, 2019, the Applicant's Manager Collections and Recoveries formally gave notice to the Respondent demanding payment of both the principal and interest due under the mortgage as evidenced in a copy of a letter produced and marked "MFN8". That by a letter dated 14th August, 2023, another • formal demand notice was issued to the Respondent demanding payment of the loan advanced plus interest which had accumulated to a sum of K661 ,606.12. A copy of the second demand letter was produced as exhibit "MFN9". 2.8. It was further deposed that on 31st August, 2023, the Respondent, through his Advocates on record, responded to the demand notices in a later of even date wherein the indebtedness was ack:no,vledged with a request to JS restructure the loan facility for a period of eight (8) years. The Applicant, through its Advocates advised the Respondent's Advocates that the request to restructure the loan facility had been declined in a letter dated 20th September, 2023. The said letters were produced and marked as "MFNl0" and MFNl 1" respectively. 2.9. It was deposed that the state of the account between the parties was as contained in a copy of the Statement of • Account marked "MFN12" 2.10.Mr. Nyirenda deposed that the Applicant had not received the outstanding sum tabulated above or any part thereof or anything of value towards the settlement of the said sum. 3. Applicant's Skeleton Arguments. 3 .1. The Applicant, through Counsel's arguments firstly cited and quoted Order 30 Rule 14 of the High Court Rules to • demonstrate how the Law permits mortgagees to seek the reliefs outlined therein before this Court in Chambers. 3.2. Counsel submitted that the Mortgage Deed exhibited in the affidavit in support proves that the Respondent borrowed a sum of K575,000.00 and pledged as a security for the repayment of same property known as Stand No. 34872/F / A703, Lusaka. Counsel explained that the Mortgage Deed was yet to be registered at the Lands and Deeds Registry, pending finalization of the conveyance of J6 the property from NAPSA to the Respondent. That the circumstances make this an equitable mortgage. 3.3. It was further submitted that the Respondent has only paid a sum of K42,502.01 towards the repayment of the loan facility, leaving a balance of K661, 606. 12. 3.4. To support the claims endorsed on the Originating process, reliance was placed on the case of Magic Carpet Travel & Tours vs. Zambia National Commercial Bank(1 ) • wherein the Court guided on how an equitable mortgage is created. That the facts herein are consistent with an equitable mortgage. 3.5. It was submitted that the Applicant's claim for the payment of the outstanding su m is backed by Order 30 Rule 14 of the High Court Rules as well as Order 88 Rule l(a) of the Rules of the Supreme Court of England. The Learned authors of Fisher and Lightwood's Law of Mortgage 13th Edition was quoted to posit on the • mortgagee's right to claim the repayment of the debt which right accrues the moment the mortgagor defaults when the payment falls du e. 3.6. It was Counsel's submission that the Respondent herein failed to make good the instalmen t payments thereby entitling the Applicant to claim for the payment of the outstanding balance. 3.7. With regards to the claim for the payment of interest, reference was made to clause 3 of tl1e Mortgage Deed J7 which stipulates that the Respondent would pay interest on the loaned sum at the rate of 21 % per annum. That the interest forms part of the debt owed to the Applicant by the Respondent. 3.8. The Applicant's claim for foreclosure was augmented with the cases of Mwabi Mwanza vs. Sangwa Simpasa and Chisha Lawrence Simpasa(2 which was cited in the case ) of Cavmont Bank Limited vs. Cereal Millers and Farms • Limited and Others(3 and S Brian Musonda (Receiver of ) First Merchant Bank (in Receivership)) vs. Hyper Food Products . Limited and Two Others(4l wherein the mortgagee's right to foreclose and its effect, namely extinguishing the right of redemption, were discussed . 3.9. Counsel finally su bmitted on the claim for the conveyance of the mortgaged property in an equitable mortgage. The case of Kasabi Industries Limited vs. lntermarket Banking Corporation Limited(5 was relied on to bu ttress I • the submission that the Applicant herein has the righ t to foreclose and consequently convey the mortgaged property to itself. 3 .10. Counsel prayed that th e reliefs being sought by the Applicant in this action be granted with costs. 4. Hearing of Application. 4.1. Th e Application was heard on 7th February, 2024. J8 4.2. In attendance, were Ms. M.L Nkonde, Counsel for the Applicant and Mr. A. Tembo, Counsel for the Respondent. 4.3. Ms. Nkonde augmented her written submissions with oral submissions, which were essentially a reiteration of the facts of this case as stated in the affidavit evidence and skeleton argument. Same shall therefore not be repeated. 4.4. Ms. Nkonde prayed that there being no defence, the Respondent be Ordered to pay the sum due forthwith • failure to which the Applicant should be allowed to foreclose the property and convey it to itself. She also prayed that that costs be awarded to the Applicant. 4.5. In response, Mr. Tembo submitted that the foreclosure proceedings were prematurely commenced by the Applicant because the Respondent has no title in his name. That the Certificate of Title exhibited in the affidavit in support is registered in the name of NAPSA and an equitable mortgage is only created with a deposit of one's • title as security for a loan as held in the Magic Carpet and Tours case. 4.6. Mr. Tembo contended that any Order that this Court makes will touch on the rights of NAPSA who are not party to these proceedings. That the foreclosure and conveyance being sought by the Applicant is not practicable due to the legal impediments as the subject property is owned by NAPSA, J9 4.7. Counsel however, admitted and acknowledged the debt owed by the Respondent and sought this Court's indulgence to allow the Respondent liquidate the said debt in 120 days. Mr. Tembo also prayed that this Court orders interest charged to be in accordance with the Judgment Act and not contractual interest as claimed by the Applicant. 4.8. Mr. Tembo submitted that the Applicant's action should therefore succeed partially as regards the liquidated claim. Counsel prayed that each party bear their respective costs. 4.9. In reply, Ms. Nkonde submitted that the Mortgage Deed which the Respondent signed clearly stipulates that he would punctually repay the loan advanced plus interest when same fell due. That in the event of default of this obligation the principal sum and interest would become payable. That the action was therefore not premature. 4.10.As regards the practicability of the claim to foreclose and convey, Ms. Nkonde acknowledged that the subject property is still registered in the name of NAPSA but contended that the Respondent has an equitable interest in the said property. That this was more so that steps were taken by NAPSA and the Respondent for the change of ownership. That it is incorrect to state that the Respondent has no interest in the subject property as that would be tantamount to saying the Respondent fraudulently signed the Mortgage Deed. JlO . . 4.11 .Ms. Nkonde maintained that foreclosure would be practical as the Respondent has equitable in terest in the eyes of the Law. That this action cannot collapse merely because the Responden t failed to obtain title of the subject property as he agreed to do so once the loan was disbursed to him. 4.12.Ms. Nkonde prayed that the foreclosure proceedings be granted should the Respondent fail to settle the • outstanding monies together with contractual interest. She also prayed for costs of this action. 5 . Consideration and Determination. 5.1. I have considered the originating process and its accompanying documents as well as the respective oral submissions by Counsel for the parties. 5.2. The within action is anchored on the provisions of Order 30 Rule 14 of the High Court Rules which provides that:- • "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 the chambers of a Judge for such relief of the nature or kind following as may by the summons be specified, and as the circumstances of the case may require; that is to sayi. Payment of moneys secured by the mortgage or charge; ii. Sale; Jll iii. Foreclosure; iv. 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; v. Redemption; vi. Reconveyance; vii. Delivery of possession by the mortgagee." • 5.3. It is common cause that the Respondent was advanced a loan sum of K575,000.00 by the Applicant. The loaned sum carried interest at 2 1.6% per annum. As security for the repayment of the said loan, the Respondent deposited with the Applicant a Certificate of Title. 5.4. However, the said Certificate of Title is in the name of NAPSA. For this reason, Counsel for the Defendant contended that the Applicant's claim for foreclosure and • conveyance was impractical. That only the claim for the liquidated sum could be sustained. 5.5. In essence, the Respondent is disputing the existence of an equitable mortgage. That any Order that this Court may make in respect of the subject property will affect the rights of NAPSA(the registered owners) who are not party to these proceedings. J12 5.6. The ch aracteristics of an equ itable mortgage were outline in the cited case of Magic Carpet Travel and Tours vs. Zambia National Commercial Bank Limited(1)as follows: "On the last issue of equitable mortgage, the position at common law is that once a borrower has surrendered his title deed to the lender as security for the repayment of the loan, an equitable mortgage is thus created; the borrower, in such a relationship cannot deal with the land without the knowledge • and approval of the lender whose interest in the land takes preced ence ... " 5.7. The foregoing position was equally stated by the Learned authors of Coote's Treatise on the Law of Mortgages, 9th Edition at page 168 as follows:- "A deposit of title deeds by the owner of freehold or leaseholds with a creditor for the purpose of securing either a debt antecedently due or a sum of money advanced at the time of • the deposit operates as an equitable mortgage or charge, by virtue of which the depositee acquires, not merely the right of holding the deed until the debt is paid, but also an equitable interest in the land itself.'' 5.8. The above authorities all speak to the natu re of equitable mortgages, namely that the owner of the title surrenders same to a creditor for purposes of securing the repayment J13 of a loan. Section 2 of the Lands and Deeds Registry Act defines a mortgage as fallows: "mortgage" includes a deposit of title deeds or documents with the object of creating an equitable mortgage on the property comprised in such deeds or documents and any charge." 5.9. The evidence on record indicates that the Respondent was • advanced the loaned sum for purposes of purchasing the subject property. On record are copies of the Contract of Sale a.11.d Deed of Assignment between NAPSA and the Respondent, all executed sometime in 2023. These confirm the Applicant's position that steps had been taken to transfer ownership of the subject property to the Respondent. The change of ownership was however not actualized. 5.10.However, it is imperative to point out that the evidence on record indicates that the Respondent applied for the • loaned sum sometime in April, 2018 which was approved by the Applicant through an offer dated 21st May, 2018 as shown in exhibit "MFN4". Also noteworthy is that the Account Statement marked "MFN12" shows that the Respondent's account was debited the sum of ZMW497,956.13 on 2nd December, 2019. 5. 11. The foregoing timeline therefore demonstrates that at the time the loaned sum was being advanced to the Respondent, the Respondent did not have an equitable J14 interest in the property as same was legally owned by NAPSA. The Contract of Sale that creates an equitable interest had not been executed yet. Therefore, even if the Certificate of Title had been deposited with the Applicant at the time the loan agreement was entered into, the Respondent lacked the capacity to form an equitable mortgage. 5 .12. I am therefore of the considered view that an equitable • mortgage was not created between the Applicant and the Respondent at the time the loaned sum was disbursed to the Respondent because the facts and sequence thereof do not meet the criteria set out in the authorities cited above. 5.13.The Respondent's equitable interest in the property only arose sometime in 2023 when the contract of sale between NAPSA and the Respondent was executed. 5 .14. The foregoing notwithstanding, the Respondent defaulted in his obligation to repay the loaned sum plus interest. • This is a fact that has been admitted by Counsel for the Respondent. 5.15.Ms. Nkonde prayed that the Respondent be ordered to settle the outstanding sum and interest forthwith while Counsel for the Respondent attempted to sneak in application to allow the Respondent liquidate same in 120 days, minus the contractual interest. Mr. Tembo prayed that the interest provided for in the Judgments Act be applied instead. JlS 5.16.In the case of National Drug Company Limited and Zambia Privatisation Agency vs. Mary Katongo(6 the ) Supreme Cou rt held th at:- "It is trite law that once the parties have voluntarily and freely entered into a legal contract, they become bound to abide by the terms of the contract and that the role of the Court is to give efficacy to the contract when one party has breached it by respecting, upholding and enforcing the contract." • 5.17. Guided by the foregoing holding, I find that the Respondent cannot escape his obligation to pay the contractual interest. Further, the Respondent defaulted in his obligations, which fact was admitted. Consequently, the Applicant's first claim is upheld. 5.18. Despite the Respondent depositing a Certificate of Title, same is not in the Respondent's name and on account of the loan agreement being entered into prior to the • Respondent having an equitable interest in the property, no equitable mortgage was created in line with the cited authorities. As such, this Court is precluded from ordering the conveyance of the property by the Respondent to the Applicant. 6. Conclusion. 6.1. The Applicant has proved that it disbursed the loaned s1.1m to the Respondent and the default in repaying same by the J16 Responde11t. The Applicant is therefore entitled to the payment of the money that was obtained by the Respondent together with the contractual interest thereon. 6.2. I therefore enter Judgment in favou r of the Applicant against the Respondent for the payment of the outstanding sum of K661,606.12 together with contractual interest accruing thereon. 6.3. The Respondent is hereby ordered to pay the above • Judgment sum together with Contractual interest within 60 days from the date of the J u dgment. 6.4. The Applicant's claim for an Order that the Respondent absolutely and unequivocally conveys to the Applicant the property is hereby dismissed for being premature and want of Title by the Respondent. 6.5. I award costs of this action to the Applicant to be taxed in default of Agreement. • Delivered at Lusaka this 23rd day of February, 2024 . - . -~ . ............... ........ . Chilombo Bridget Maka HIGH COURT JUDGE J17