SCZ SELECTED JUDGMENT No. 11 of 2017

P. 328

IN THE SUPREME COURT OF ZAMBIA

APPEAL No: 150/2016

HOLDEN AT NDOLA

(Civil Jurisdiction)

BETWEEN:

COURTYARD HOTEL LIMITED APPELLANT

AND

ZAMBIA NATIONAL COMMERCIAL BANK 1ST RESPONDENT

EDGAR HAMUWELE (Sued in his capacity as joint Receiver of Courtyard Hotel Limited) 2ND RESPONDENT

CHRISTOPHER MULENGA (Sued in his capacity as joint Receiver of Courtyard Hotel Limited) 3RD RESPONDENT

Coram: Wood, Malila and Mutuna, JJS

on 7th March, 2017 and 10th March, 2017

For the Appellant: Mr. J. Madaika, Messrs J 86 M Advocates

For the 1st Appellant: Mrs. A. Mwalule, in-house counsel

For the 2nd and 3rd Respondents: Mr. K. Chenda of Messrs Simeza Sangwa 86 Associates

JUDGMENT

Malila, JS, delivered the Judgment of the Court.

Cases referred to:

Lloyds Bank Limited u. Bundy [1974]3 ALL ER 753 Intermarket Banking Corporation u. Kasonde, Appeal No. 139/2009

/2014]

J. I

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Royal Bank of Scotland LI. Etridge (No.2) and Other Appeals (2001) 4 ALLER 457 National Westminister Bank v. Morgan [1985] 2 WLR 588 Allcard v. Skinner [1887] 36 Ch.D 145 A. Schroeder Publishing Company Limited v. Macaulay [1974] 1 WLR 1308 Attorney-General u. Marcus Kampumba Achiume [1983] ZR. 1

Communications Authority v. Vodacom Zambia Limited [SCZ No. 21 of 2009] Zambia National Commercial Bank Plc, Edgar Hamuwele, Christopher Mulenga and Courtyard Hotel, Appeal No. 141 of 2015 NFC African Mining Plc v. Lofoyi Enterprises Limited [SCZ No. 27 of 2006]

11., Trade Kings Limited v. Uniliver Plc and Cheesebrough Ponds (Z) 'Limited and Lever Brothers (Z) [2000] ZR. 16

12.' Holmes Limited v. Buildwell Construction Company Limited [1973] ZR 97

13. Attorney-General v. Kakoma [1975] ZR 216 14.Patrick Makumbi 8625 Others v. Greytown Breweries and 3 Others,

Appeal No. 32/2012 15. Wilson Masauso Zulu v. Avondale Housing Project [1982] ZR. 172

Legislations and other works referred to:

Order 30 rule 14 of the High Court Rules, Chapter 27 of the laws of Zambia Companies Act, Chapter 388 of the laws of Zambia Atkins Court Forms, 2nd Edition, 2002, Vol. 28 at page 23 Snell's Equity, 29th edition

The appellant company was facing an enormous financial

predicament. It had luminous plans to confect a new hotel along

Great North Road to be called the Courtyard Express Hotel. It had

borrowed money from lenders but still found itself without

financial resources to complete the project. The shortfall was

huge. In December, 2011, it approached the first respondent bank

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for a loan facility in the order of fifteen million United States

Dollars (US$15,000,000). It needed this money to refinance

existing loans and to complete construction works on the hotel.

Typical of financial institutions, the first respondent only

reverted to the appellant on its request several months later,

presumably after a viability assessment of the project. Even then,

the first respondent declined to grant the US$15,000,000 sought

by the appellant. It instead expressed willingness to lend the

appellant only eight million United States Dollars (US$8,000,000)

against specified securities.

The first respondent issued a credit facility letter for the said

sum of US$8,000,000 on the 4th April, 2012, which was only

signed by the parties on the 12th April, 2012. Disbursement of the

US$8,000,000 did not commence until about June, 2012. The

appellant company began to service the loan but claimed that

owing to the long period that had elapsed between the request for

the loan and the disbursement, the cost of construction had

escalated. This prompted the appellant to revert to the first

respondent bank in September, 2012 with a request that the first

respondent bank provides a further amount of one million United

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States Dollars (US$1,000,000) to cover the shortfall that had

resulted from the escalated cost of construction. The first

respondent bank, according to the appellant, acceded to that

request and issued a supplementary offer letter on the 8th October,

2012. In that letter the appellant was also requested to furnish

further securities to secure the original loan amount of

US$8,000,000, which securities the appellant claimed it duly

furnished.

In spite of all this, the first respondent, in December 2012,

informed the appellant that the request for a further loan of

US$1,000,000 had been declined. The appellant was naturally

taken aback by this development, particularly given that it had in

the meantime paid into the bank two hundred and forty thousand

United States Dollars sums of (US$240,000) and seventy five

thousand United States Dollars (US$75,000) in or about October,

2012 at the request, as it claims, of the first respondent, which

deposits the appellant understood was a prerequisite for the

disbursement of the additional US$1,000,000 requested for. The

delayed communication of the rejection of the additional

US$1,000,000 loan sought, according to the appellant, resulted in

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further escalation of construction costs, and the original loan was

already accruing interest and repayments had to be made by the

appellant despite the first respondent's failure to honour their

assurance to avail additional funds.

Undeterred by all these developments, the appellant kept the

faith and in January, 2013 once more approached the first

respondent to reconsider its rejection of the appellant's application

for an additional loan, bearing in mind the additional securities

that had been furnished to the first respondent. In this regard, the

appellant moderated its request downwards to five hundred

thousand United States Dollars (US$500,000) in place of the

US$1,000,000 it had originally sought. This request too, was

denied. As if subliminally responding to the teaching of the Holy

Book 'ask and it shall be given,' the appellant, in May 2013, was

again knocking at the first respondent's door, asking that the loan

be restructured up to October, 2013, and that as part of the

restructuring, an additional disbursement of two hundred

thousand United States Dollars (US$200,000) be made in favour

of the appellant. According to the appellant, the first respondent

appeared willing to restructure the loan, and as part of the

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condition for that restructuring, requested the appellant to execute

a debenture to include, as security, additional assets of the

appellant. According to the appellant, it reluctantly did as

requested.

In November, 2013, the appellant, with indomitable faith,

once again pleaded with the first respondent to release the

US$200,000 additional loan funding but to no avail. According to

the appellant, as at the time of commencement of these

proceedings against the respondents, that is to say, 21st February,

2014, the first respondent had not disbursed a single cent of the

US$200,000 that it had undertaken to disburse on the strength of

the debenture.

Various efforts to get the matter resolved amicably were

unsuccessful. The appellant found the refusal by the first

respondent to live up to its commitment to advance a further

US$200,000, especially after additional securities had been

furnished, to amount to fraudulent misrepresentation which

undermined the appellant's quest to complete construction of the

hotel and in this sense clogged the efforts of the appellant to live

up to its contractual commitment under the original loan

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agreement. The fraud alleged comprised the procurement by the

first respondent of the signature of Ayubu Mulla, a director of the

appellant, on the debenture by false pretences that US$200,000

would be disbursed following signature of the debenture.

The appellant complained that the first respondent had

illegally held on to securities for which it had not furnished any

consideration in terms of monetary disbursement of additional

funds. It accused the first respondent of colluding with the second

and third respondents to dispose of the appellant's assets even

before the appointment of the second and third respondents as

receivers.

In these circumstances, the appellant's loan repayments

became delinquent. The first respondent consequently wrote a

letter of demand and in February, 2014, sought to enforce the

debenture and appointed the second and third respondents as

joint receivers of the appellant company pursuant to the provisions

of the debenture. The appellant maintained that the debenture

had no legal efficacy as consideration for it had wholly failed.

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As no settlement would be reached amicably between the

parties, frustration must have taken the better of the appellant

who decided to commenced proceedings in the High Court,

claiming a medley of relief, key among which were:

a declaration that the failure by the first respondent to

disburse the money pledged to be disbursed under the

debenture amounted to a breach of the condition of the

said debenture which thereby rendered the debenture null

and void for want of consideration on the part of the 1st

respondent;

an order that any attempts by the respondents to enforce

the said debenture are illegal, null and void;

an order that the appointment of the second and third

respondents as joint receivers was null and void;

that the substantive agreement in place and enforceable

between the appellant and the first respondent was a

credit facility letter dated 4th April, 2012.

an order that the first respondent's action of obtaining a

further collateral from the appellant but failing to release

funds amounted to fraudulent misrepresentation;

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damages for misrepresentation, for trespass, and special

damages for costs incurred by the appellant on account of

the first respondent's misrepresentation; and

an injunction restraining the respondents or the agents

from entering the appellant's premises.

The first respondent opposed the appellant's action in the

lower court, arguing in the main, that the delay in disbursement

of the funds on the US$8,000,000 loan was occasioned by the

appellant which delayed in meeting all the loan conditions, and

that the first respondent had no obligation of providing for any

escalation in costs - the same being the responsibility of the

appellant. The first respondent also averred that the request for

further security from the appellant was for the purpose of securing

the original loan amount and not for purposes of disbursing the

US$1,000,000 requested for. The first respondent further averred

that it properly communicated its non-approval of the additional

loan applied for by the appellant and, therefore, that there was no

agreement in respect of theUS$1,000,000.

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The first respondent denied that there was any agreement for

disbursement of additional funds or for extra securities and

averred that the terms of the restructuring of the facility were

contained in the facility letter dated 21st June, 2013.

Equally, the first respondent denied most categorically that

there was any agreement for disbursement of US$200,000 or that

any undue influence was exerted on any of the appellant's officers

to sign the floating debenture. Furthermore, that its appointment

of the second and third respondents as joint receivers was perfectly

in accordance with the first respondent's rights under the

debenture which was, according to the first respondent, properly

executed.

The second and third respondent equally denied the claim,

raising a technical argument that the appellant did not have the

locus stanch to commence proceedings in its name given that the

appellant was at the time under receivership. The commencement

of the action, according to the second and third respondents,

contravened the provisions of the Companies Act, Chapter 388 of

the laws of Zambia. Consequently, the second and third

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respondents were of the view that the action was null and void ab

initio.

The learned High Court judge heard the matter and received

evidence from the parties. In a very long judgment covered in 71

pages he came to the conclusion that there was no misdirection on

the part of the first, second or third respondents, nor was there

any misrepresentation or undue influence. He was of the view that

all the securities which the first respondent held in respect of the

loan agreement evinced by the letter of 4th April, 2012, inclusive of

the debenture, are enforceable in accordance with their terms. He

dismissed the appellant's action in its entirety, discharged the

interlocutory injunction which he had granted and directed the

first, second and third respondents to recover any damages which

they may have incurred as a result of the injunction.

It is against that judgment that the appellant has now

appealed, raising five ground of appeal structured as follows:

1. The learned puisne judge erred in law and fact when he held that

there, was no unconscionable conduct or fraudulent

misrepresentation in the manner that the first respondent

dealt with the appellant as its customer/client.

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The learned puisne judge misdirected himself when he held that

there was no reference to a redeemable mortgage either in the

pleadings or the evidence and that therefore the question of the

appellant's equity of redemption has no place in this action.

The learned puisne judge erred in law and fact when he found

that the debenture deed was meant to secure the original loan

of US$8,000,000 which finding was made against the weight of

the evidence adduced before him and is therefore perverse.

The learned puisne judge misdirected himself when he failed to

consider the documentary evidence and the witness' testimony

as a whole, but instead chose to highlight certain pieces of

evidence in isolation and made findings of fact based entirely

on the said isolated evidence without referring to or contrasting

it with the other evidence on record.

The learned puisne judge erred in law when he failed to make a

definitive order for the return of the securities being held by the

1st respondent for which no funds have been furnished.

On behalf of the appellant heads of argument were filed on

the 4th of August, 2016. Supplementary heads of argument and

list of authorities were also filed on the 20th February, 2017. On

behalf of the first respondent, heads of argument were filed on the

23rd February, 2017 while those on behalf of the second and third

respondent were filed on the 24th February, 2017. It is on these

heads of argument that the learned counsel for the parties

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principally relied. Oral arguments were also made to supplement

these heads of argument.

In relation to ground one, Mr. Madaika, learned counsel for

the appellant contended that the trial court misdirected itself in

not holding that there was some form of unconscionable conduct

or fraudulent misrepresentation in the manner in which the first

respondent treated the appellant. He argued that the first

respondent used its position as a party having a higher bargaining

power to exert some form of undue advantage over the appellant

especially in regard to the debenture issued by the appellant in

favour of the first respondent. We were referred to a passage in

the judgment of the lower court which stated that: "...therefore, the

letter in question merely required the plaintiff (appellant) to furnish

further securities for the initial loan in the sum of US$8,000,000..."

The appellant's learned counsel asked the question why the

appellant would keep on furnishing other securities over an

amount which had already been secured but which amount was

not adequate.

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In an effort to demonstrate that there was unconscionable

conduct on the part of the first respondent, counsel for the

appellant claimed that from the cross examination of PW1, it was

clear that the appellant had paid into the first respondent's

account the sums of US$240,000 and US$70,000 as part of the

precondition for the disbursement of the additional loan. The

lower court should have found that indeed there was

unconscionable conduct on the part of the first respondent.

The argument of the appellant on this ground in a nutshell,

was that the lower court did not meticulously consider the

evidence before it which clearly suggested that there was

unconscionable conduct on the part of the first respondent which

used its influential position to the detriment of the appellant. The

learned counsel ended his arguments on ground one by submitting

that the evidence of PW1 was to the effect that the second and third

respondents as receivers, working in collusion with the first

respondent, had already connived with Red Sea Limited and Grand

Palace Hotel to sell Courtyard Hotel along Thabo Mbeki Road, and

that that evidence went unchallenged in cross-examination.

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In the supplementary heads of argument it was submitted

that the appellant's officers had over the period developed a close

relationship with the first respondent's officer to a point where a

considerable level of informality was allowed to creep into the

negotiations. Exchanges over the loan facilities became verbal

despite the collosal amounts involved. The trust and confidence

that ensued was inappropriately exploited by the first respondent,

leading the appellant's officers to sign certain documents on the

understanding that this would result in the release of further

monies to the appellant.

It was also argued that the debenture deed was not part of

the loan facility of the 4th April, 2012, and that there was no

mention in the deed itself or in the restructured loan facility letter

of 21st June, 2013 of the debenture. The learned counsel made

reference to the case of Lloyd Bank Limited v. Bundy(1) and the case

of Intermarket Banking Corporation v. Kasonde(2), in both of which the

courts frowned upon undue influence in a banker/customer

relationship.

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In responding to ground one of the appeal, Mrs. Mwalule,

learned counsel for the first respondent, submitted that the

business relationship between the appellant and the first

respondent as demonstrated in the evidence deployed in the court

below, was a normal one and not one of trust and confidence in

the manner suggested by the appellant. Relying on the case of

Royal Bank of Scotland v. Etridge (No.2)(31, the first respondent's

counsel submitted that the relationship of a banker and customer

does not meet the criterion of trust and confidence unless the bank

also has a dominating influence on the customer, or the

transaction is so manifestly to the disadvantage of the customer.

This position, according to counsel, is also supported by the House

of Lords decision in National Westminister Bank Plc v. MorgaM4).

The first respondent maintained that there was no pressure

whatsoever exerted on the appellant to borrow and provide

security, and that a presumption of trust and confidence alone

cannot give rise to a claim for undue influence. For this

submission reliance was also placed on the judgment of Lindley J,

in Allcard v. Skinner(5) where undue influence was described as

'some unfair and improper conduct, some coercion from outside,

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some overreaching form of cheating and generally, though not

always, some personal advantage gained.'

It was the first respondent's case on this ground that the

appellant entered into the borrowing transaction with the first

respondent freely and without undue influence as understood in

the law referred to. Furthermore, the appellant benefited from the

borrowing.

On behalf of the second and third respondent it was

submitted by Mr. Chenda, learned counsel, in relation to ground

one that the issue of unconscionable conduct on the part of the

first respondent in regard to the appellant's execution of the

debenture does not arise. Five reasons were enlisted for this

submission as follows:

(a) At inception of the facility the appellant was expressly

advised in writing of its right to seek independent legal

advice before signing any security document. We were

referred to the facility letter of 4th April, 2012 which states

in clause 7.13 that:

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"INDEPENDENT LEGAL ADVICE

The Bank hereby advises you that nothing contained herein

shall preclude your right to retain at your own cost an

independent legal practitioner for purposes of the review on

your behalf of all and any legal and security documentation

pertaining to the facilities, prior to your execution of the

same. The importance of doing so is for the safeguard of your

own interest in this regard, notwithstanding the fact that the

Bank shall remain the instructing party in respect of all

security documentation pertaining hereto."

the debenture of 10th June, 2013 was preceded by an

additional security in a letter dated 31st May, 2013 whose

terms were signed for and accepted by the appellant;

the appellant was already familiar with banking practices

and banking documentation having previously had

facilities with other banks;

the debenture was signed on behalf of the appellant by a

middle aged and educated business executive whose

credentials in the affidavit include the lofty title of Dr'; and

the appellant has not demonstrated that the debenture

contains anything other than the usual standard terms

including the power to appoint a receiver.

It was further contended that although in its amended pleadings

the appellant gave some particulars of fraudulent

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misrepresentation, those particulars were at variance with the

evidence adduced which did not reveal any representation by the

first respondent that disbursement of US$200,000 would follow

upon the execution of the debenture. It was also pointed out that

the debenture does not make any reference to the US$200,000

additional loan as claimed; rather it categorically states in clause

24 that the security was for the US$8,000,000 which amount

comprised the pre-existing facility.

It was also contended on behalf of the second and third

respondent that even the correspondence exchanged between the

parties did not make reference to the US$200,000. More

importantly, our attention was drawn to clause 8.11 of the facility

letter of 21st June, 2013 which stated as follows:

"The availability of these facilities is at all times subject to the

Banks compliance in such a manner as it thinks fit with any and

all restrictions, rules and regulations of the Bank of Zambia or any

other applicable regulatory authority from time to time in force.

The above facilities are subject to periodic review by the Bank at

its discretion and it is expressly agreed that the facilities will at all

times be available at the sole discretion of the Bank."

We were also referred to the portion in the record of appeal

recording the evidence of PW1 (Dr. Mu11a) who, in cross-

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examination, conceded that the disbursement of US$200,000 was

subject to the fulfilment of the security requirements which the

appellant failed to satisfy.

We were urged to dismiss ground one of the appeal.

We have carefully considered the arguments under this

ground of appeal against the evidence on the record of appeal. The

question that calls for determination is whether the transaction

between the parties was unconscionable, that is to say, whether it

was so one sided that it was unfair to one party and, therefore,

unenforceable under law? In other words, was it a contract that

left one party with no real, meaningful choice?

A contract will be unconscionable if one of the three different

factors are present, namely undue influence, duress or unequal

bargaining power. The basic characteristic of most unconscionable

contracts is that one party signed under situations involving

pressure, lack of information, or by being misled. The increasing

judicial willingness to intervene in contractual dealings involving

any of these factors was perhaps most fully articulated by Lord

Denning, MR in Lloyds Bank Limited v. Bundy(1) which was referred

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to by Mr. Madaika in his submissions, and by the House of Lords

in A. Schroeder Publishing Company Limited v. Macaulay(6), a case

involving a restraint of trade. Judicial intervention depends on the

equitable doctrines of unconscionability and undue influence to

justify the court's holding of contracting parties to standards of

behaviour which the courts regard as acceptable. The claim that

the basis of the equitable doctrines of unconscionability and

undue influence lay in 'inequality of bargaining power' received the

most forceful expression in the judgment of Lord Denning, MR in

Lloyds Bank v. Bundy(1), which judgment, we must observe, was later

specifically disapproved by a unanimous House of Lords in National

Westminister Bank v. Morgan(4) to which Mrs. Mwalule referred.

The majority in Lloyds Bank v. Bundy(1) (Cairns, IA and Sir Eric

Sachs, with Lord Denning agreeing in the alternative), had reached

a result, not on the basis of Lord Denning's principle of 'inequality

of bargaining power,' but on the narrower ground that the

appellant bank had breached a duty consequent upon its

relationship of confidence with the respondent, and that the case

could, therefore, be decided upon the doctrine of undue influence

as defined in Allcard v. Skinner(5). This is the approach which was

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followed in the case of National Westminister Bank v. Morgan(4). We

must add that this case resulted in a restatement of the principle

governing undue influence which is now of fundamental

importance in English law. The House of Lords was clear that

There is no precisely defined law setting limits to the equitable

jurisdiction of a court to relieve against undue influence' and that

the court 'in the exercise of this equitable jurisdiction is a court of

conscience' determining unconscionability of a transaction 'upon

the particular facts of a case' (per Lord Scarman, at 602 B-D). The

court also reaffirmed the position that before a transaction can be

set aside on the basis of undue influence, it must be shown to be

wrongful as of manifest and unfair disadvantage to the person

seeking to avoid it.

In the present case it is the appellant's case that it was led

into furnishing the additional security in the form of a debenture

by false representation that an additional loan would be availed as

a consequence of the furnishing of such additional security.

An examination of the evidence on record shows that the

security required for the loan of US$8,000,000 was listed in

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clause/paragraph 6 of the credit facility letter of 4th April, 2012. It

did not include a debenture. There was a supplementary offer

letter dated 8th October, 2012, which equally referred to the

security already held and that still required by the first

respondent. There too, no debenture was mentioned. The loan

facility was later restructured. In the letter from the respondent

dated 21st June, 2013 the restructured term loan of US$9,000,000

consolidated the existing term loan of US$4,519,728.30,

unauthorised overdraft balance of ZMW1,516,191 as at 31st May,

2013 and additional Term Loan of US$200,000. It is in this letter

that a floating debenture over all company assets of the appellant

was listed as security for the first time. That floating debenture

was promptly executed and filed at the Patents and Companies

Registration Agency on 11th June, 2013. It is on the basis of that

debenture that the first respondent appointed the second and third

respondent as receivers. The question is whether the debenture

was required by the first respondent on the back of any promise

that an additional loan amount would be disbursed.

We have examined the letter of the 11th June, 2013 as well as

other correspondence exchanged. We are inclined to accept the

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arguments that have been put forth by the learned counsel for the

first respondent that this was a transaction in which the parties

negotiated in good faith. The appellant may well have been

labouring under some misapprehension that the first respondent

would provide further funding facilities to the appellant.

An examination of all the correspondence exchanged leaves

us in no doubt that the first respondent did not make any definite

commitment that upon signing a floating debenture, the appellant

would be availed a further loan amount. We are particularly

persuaded by the reasons listed by Mr. Chenda, in his heads of

argument, that there was no unconscionable conduct on the part

of the first respondent. The provisions of clause 7.13 of the facility

letter of 4th April, 2012 make it plain that the first respondent did

not intend to arrogate to itself exclusive knowledge and influence

in determining the legal consequences arising from the securities

given for the facility. The facility letter as quoted by Mr. Chenda

plainly advised the appellant to seek independent legal advice. All

the factors identified by Mr. Chenda regarding the peculiar

circumstances of the appellant make untenable any claim that the

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debenture was procured under conditions that confirm

unconscionability and undue influence in the way we have

explained it. Of course, the bargaining power between the parties

is necessarily unequal - the bank having the resources to lend on

its own terms, and the appellant being in no position to dictate the

terms on which it wanted to borrow. There could even have been

a relationship of trust and confidence arising, but as Mrs. Mwalule

correctly pointed out, this alone should not give rise to a claim

premised on unconscionability and undue influence. The

appellant, in our view failed to demonstrate unconscionability,

undue influence or indeed duress exerted by the first respondent

over it to sign the debenture, nor are we able to see any

misrepresentation from the documents available. Ground one is

bound to fail and we dismiss it accordingly.

In respect of ground two, it was contended on behalf of the

appellant that the lower court misdirected itself when it held that

there was no reference to redeemable mortgages either in the

pleadings or the evidence, and therefore, that the question of the

appellant right of redemption had no place in this action. Counsel

referred us to the case of Attorney-General v. Marcus Kampumba

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Achiume(7) as well as that of Communications Authority v. Vodacom

Zambia Limited(8) to support the argument that an appeal court will

not reverse findings of the trial judge unless it is satisfied that the

findings in question were either perverse or made in the absence

of any relevant evidence or upon a misapprehension of the facts.

In relation to the present case, it was contended that the findings

by the lower court that there was no reference to the redeemable

mortgage either in the pleadings or in the evidence is perverse in

that the evidence on record shows that the parties had secured a

debenture, and that the law governing debentures is the law of

contract, and therefore, that a debenture like any other contracts

is subject to the requirements of the same ingredients namely,

offer, acceptance and consideration.

In response to the second ground of appeal, the first appellant

submitted that there was no misdirection on the part of the trial

judge when he held that there was no reference to redeemable

mortgage either in the pleadings or in the evidence and, therefore,

that the appellant's equity of redemption had no place in this

action. The argument on behalf of the first respondent was simply

that the appellant's action in the court below was premised on the

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enforceability of the floating debenture between the appellant and

the first respondent. In these circumstances the learned trial

judge was on firm ground in his finding.

The learned counsel for the second and third respondents

effectively reinforced the submission of the first respondent,

buttressing it with a quotation from Snell's Equity, 29th edition on

the equity of redemption. The thrust of counsel's argument was

that the concept of equity of redemption is one peculiar to

mortgage actions. In the present case, the appellant's amended

process clearly shows that the action was not a mortgage action

under Order 30 rule 14 of the High Court Rules, Chapter 27 of the

laws of Zambia, but an ordinary action seeking to challenge the

validity of a legal instrument being a debenture.

We have no hesitation in agreeing with the learned counsel

for the respondents that to the extent that the present action was

based on a floating debenture and not on a mortgage, the

appellant's grievance is misconceived. What the first respondent

sought to do by appointing the second and third respondent was

to enforce the terms of the debenture, not the mortgages that were

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created over other properties. As with all securities, however, the

lender is under an obligation to render an account after realising

what is owed to it. Ground two of the appeal is without merit and

must fail.

In respect of ground three, the appellant attacked the lower

court's finding that the debenture deed was meant to secure a loan

of US$8,000,000. The learned counsel took us through the history

of the application and disbursement before submitting that the

additional debenture as security was deposited by the appellant

with the first respondent for purposes of further disbursements

and not for the purposes of securing the initial loan. Counsel

repeated the authorities he had earlier cited in regard to the

circumstances in which the court may reverse findings of fact,

before concluding that the trial court failed to analyse the evidence

before him and that this was a misdirection which this court ought

to correct.

After referring to the mortgage's primary covenant and

referring us to a passage in Atkins Court Forms, 2nd Edition, 2002,

Vol. 28 at page 23, counsel for the appellant submitted that the

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P. 356

appellant was misled by the first respondent in that the first

respondent led the appellant to believe that the execution of the

debenture deed would be followed by the first respondent

disbursing further funds. He added that the appellant would not

have executed the debenture deed had there not been an

assurance or promise from the first respondent that such a

disbursement would be made. Counsel argued that the first

respondent's failure to disburse the funds must negate the

debenture for being without consideration.

The first respondent's response to ground three of the appeal

is simply that the lower court judge was right in holding that the

debenture was intended to secure the original loan of

US$8,000,000. Counsel for the first respondent pointed to clause

24 of the debenture deed which states that:

"The total amount recoverable hereunder shall be United States

Dollars Eight Million (US$8,000,000) and accordingly the security

hereby constituted is to be available for such amounts as may be

outstanding from time to time together with interest thereon."

Having quoted that clause of the debenture, the learned counsel

submitted that the floating debenture made no reference to

disbursement of a further US$200,000 as claimed by the

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P. 357

appellant. The alleged undertaking by the first respondent in their

letter of 21st June, 2013 restructuring the facility was made way

after the said debenture was executed. Logically, therefore, the

debenture could not have been executed with a future possible

event in mind.

Mrs. Mwalule further submitted that the debenture makes no

mention of a further US$200,000 and neither does the credit

facility letter of 21st June, 2013. The lower court, according to the

learned counsel, could not make a finding of fact contrary to the

evidence before it. More purposefully perhaps, the learned counsel

referred us to our judgment involving the same parties as here in

Appeal No. 141 of 2015 between Zambia National Commercial Bank

Plc, Edgar Hamuwele, Christopher Mulenga and Courtyard Hotel(9) where

it was stated that the debenture was intended to secure the

US$8,000,000. In that case, Kaoma JS, on behalf of the court,

stated among other things that:

"...there is no dispute that the Pt defendant granted a loan of

US$8,000,000 to the plaintiff or that the plaintiff provided security

for the loan facility in form of its properties and executed a

mortgage deed. Additionally, the plaintiff provided further

security in form of a floating debenture dated 10th June, 2013,

relating to all its undertakings and all its property assets and rights

J31

P. 358

whatsoever and wheresoever, including its uncalled capital and

goodwill both present and future."

Mr. Chenda for his part contended that ground three and

ground four attacked findings of fact without satisfying the

requirements for such an effort as we set them out in a number of

cases including Communications Authority of Zambia v. Vodacom

Zambia Limited(8). Counsel claimed that the trial judge made a

holistic evaluation of the evidence before it prior to arriving at its

findings. He reproduced portions of the lower court's judgment in

this regard.

We think, with respect to counsel for the appellant, that this

ground is bereft of merit. Part of the reasons for the position we

take have already been covered in regard to grounds one and two

of this appeal.

On the broader argument that additional security in the form

of a debenture was requested for and furnished without

consideration or reciprocity from the first respondent we do not

think that the initial lending of US$8,000,000 can be separated

from the later request from additional security. A bank as lender,

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P. 359

does in our view have the right to call for collateral additional to

collateral already furnished even if the monies intended to be

secured was already disbursed, provided that there is a

contractual term allowing it to do so. An examination of the facility

letter of 4th April, 2012 reveals that the first respondent bank had

invested in itself a power to amend or alter the conditions of the

loan, in some cases with retrospective effect. The opening

paragraph of that letter states in part that:

"Zambia National Commercial Bank Plc ("the Bank") is pleased to

offer Courtyard Hotel Limited ("the Borrower") credit facilities as

outlined below, subject to conditions precedent and upon

representations and warranties as set out herein as modified by the

Bank from time to time and subject to the satisfactory completion

of any security documentation."

Clause 7 relates to breach by the borrower of the conditions of the

loan, and the rights of the bank in those circumstances. Clause

7.2.5 specifically entitles the bank to:

"modify the pricing of the facility and/or call upon the borrower to

provide additional collateral/security in form and substance

satisfactory to the Bank, under a restructured facility in its sole

discretion."

There is no argument that the appellant experienced remarkable

difficulties in honouring its obligations under the loan as originally

J33

P. 360

given. This culminated in the restructuring as set out in the letter

of 15th June, 2013 in terms of which additional security in the form

of a floating debenture was requested for. All these circumstances

taken together make the argument by the appellant that the first

respondent provided nothing in return for the additional security,

i.e. the debenture, fanciful in law.

As to what amount of the loan the debenture sought to

secure, the debenture deed, as Mrs. Mwalule pointed out, speaks

for itself. There is no mention whatsoever that the floating

debenture was intended to secure any additional funding beyond

the US$8,000,000. Furthermore, this was a question of fact upon

which, as Mr. Chenda pointed out, the learned trial judge made a

finding. We do not think that the finding was perverse or made in

the absence of evidence. We are above all satisfied that in our

judgment in Appeal No. 141 of 2015, this issue was dealt with and

the position of this court made clear. We do not intend to either

reverse ourselves or contradict what we stated in that case. But

more pertinently, the documents before us eloquently state what

the debenture was intended to secure. Ground three is destitute

of merit. It is dismissed accordingly.

•

1

J34

P. 361

Under ground four, the appellant alleges that the learned trial

judge did not consider the documentary evidence and witnesses'

testimony in whole, but chose to highlight certain parts of the

evidence adduced in isolation, and thereby making the findings of

facts based entirely on the isolated evidence. This, according to

the learned counsel, is a misdirection. He cited the case of NFC

African Mining Plc v. Lofoyi Enterprises Limited(10) to support his

submission. Mr. Madaika argued that the appellant produced

sufficient evidence to support its case which the lower court failed

to adequately take into account. We were referred to the case of

Trade Kings Limited v. Uniliver Plc and Cheesebrough Ponds (Z) Limited

and Lever Brothers (Z)("), where the necessity to adjudicate upon all

issues actually presented was emphasised.

Mrs. Mwalule impugned the arguments of the appellant

under ground four of the appeal principally on the basis that the

documentary evidence before the lower court outweighed the

testimony of the appellant's witnesses which was, at any rate, at

variance with the documents executed by the appellant. We were

referred to the High Court decision in the case of Holmes Limited v.

Buildwell Construction Company Limited('2) where Bruce Lyle J,

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P. 362

restate the well-known position of the law that where a written

document embodies the terms of a contract a party will not be

allowed to introduce extrinsic evidence to add to, subtract or vary

the written document.

In his submission on this ground Mr. Chenda echoed the

arguments of Mrs. Mwalule but went still further to refer to specific

portions of the record of appeal to demonstrate the folly of the

appellant's argument. More significantly, and as we have already

pointed out, his general argument was that the ground of appeal

sought to upset a finding of fact.

We have carefully considered the arguments of counsel for

the parties relative to ground four of the appeal. It seems to us

that the grievance of the appellant relates mainly to the treatment

by the trial court of the evidence before him. Our examination of

the judgment of the trial court leaves us in no doubt whatsoever

that the judge did meticulously consider the conflicting positions

of the parties in terms of both the evidence and the submissions.

At J53 of the judgment, the trial judge stated as follows:

"I have perused the submissions by counsel though, from my

vantage point, I find both sets of submissions to be barely helpful.

J36

P. 363

The documents on record considered in light of the evidence

adduced by the witnesses appear to be less convoluted than

counsel made the case to appear in their submissions..."

We do not think, therefore, that the criticism of the trial judge as

set out in ground four of the appeal is correct. We have stated in

numerous case authorities that as an appellate court it is not our

role to assess evidence and make findings of fact. In Attorney-

General v. Kakoma(13) we observed as follows:

"[a] court is entitled to make findings of fact where the parties

advance directly conflicting stories and the court must make those

findings on the evidence before it having seen and heard witnesses

giving that evidence."

We reiterated this position in Patrick Makumbi & 25 Others v.

Greytown Breweries and 3 Others(14), where we stated that:

"we are of the firm view that assessment of conflicting witnesses'

evidence is in the province of the trial court: it does not belong

here."

Given the position of the law as we have given it, we do not

think that the learned trial judge can be faulted for making his

assessment of the evidence before him and reaching the

conclusion that he did. Ground four has no merit. It is dismissed

accordingly.

„

J37 • 40 •

P. 364

Ground five of the appeal challenged the lower court for

failing to make what the appellant called a definitive order on the

return of the securities that are being held by the first respondent

for which no funds were disbursed. According to counsel for the

appellant, this was a misdirection as it amounted to the lower

court failing to adjudicate on all matters in dispute. The case of

Wilson Masauso Zulu v. Avondale Housing Project115) was cited to

buttress that submission. Counsel ended by urging us to uphold

the appeal on all grounds.

The response of the first respondent on the arguments in

relation to ground five is that the first appellant is not illegally

holding onto any security documents as the appellant claims. The

certificates of title numbers 77630 and 77631 are still in the

possession of the first respondent as the lower court found. The

purpose for which they were collected, namely registration of

assignments for rentals receivable had not yet been completed.

Counsel for the first respondent contends that those title deeds

were never collected for purposes of collateral but for registration

of leases on them.

........ A. M. o

SUPREME COURT JUDGE

J38

P. 365

Mr. Chenda also gave detailed submissions on this very

aspect supported by authorities. It is unnecessary to reproduce

those arguments here.

We do not think that this ground of appeal merits any further

consideration then it has been given. The certificates of title were

given to the first respondent for the specific purpose of registration

of receivables from leases. There should be no question of the first

respondent using those title deeds for any other purpose than what

was intended by the parties. As the purpose intended has not been

achieved for whatever reason, the claim in ground five is clearly

premature. It is misconceived. We accordingly find no merit in

ground five of the appeal and dismiss it accordingly.

The net result is that the whole appeal is without merit and

is dismissed in its entirety. The respondents shall have their costs

to be taxed in default of agreement.

N K „ut na SUPRE COU T JeDGE

tcf Malila SC SUPREME COURT JUDGE