..

719

SELECTED JUDGMENT NO. 28 OF 2015

IN THE SUPREME COURT OF ZAMBIA APPEAL NO. 104/2015

HOLDEN AT NDOLA SCZ/8jl28/2015
(CIVIL JURISDICTION)

BE~WEEN:

AFRICAN BANKING CORPORATION (Z) APPELLANT

LIMITED (T/ A BANK ABC)

AND

PLINTH TECHNICAL WORKS LIMITED 1ST RESPONDENT

IAN HARUPERI 2ND RESPONDENT

JOSEPH MBAZZI MUGLUMA 3RD RESPONDENT

JOHN BOSCO KASASIRA 4TH RESPONDENT

VICTORIA SIKOMBE 5TH RESPONDENT

NEO MUBIANA 6TH RESPONDENT

CORAM: Chibomba, Hamaundu and Kaoma, JJS

On: 1st September and 9th September, 2015

For the Appellant Mr. G Pindani - Chonta, Musaila &

Pindani Advocates
For the 1st, Respondent: N/ A
For the 2nd Respondent: Mrs. A.D.A. Theotis - Theotis Mataka &
Sampa Legal Practitioners
For the 3rd, 4:h, 5th & 6th Respondents: N/ A
 J2

720

JUDGMENT

KAOMA,JS, delivered the Judgment of the Court.

Cases referred to:
1. National Westminster Bank v Kitch (1990) 1 W.L.R. 1316
2. Royal Bank of Scotland v Etridge (2001) UKHL 44
3. Barclays Bank Pic v 0' Brien (1994) 1 AC 180
4. National Westminster Bank Pic v Morgan (1985) AC 180
5. National Westminster Bank Pic v Alfonso and Others (2012) EWHC 1020
6. Kalusha Bwalya v Chadore Properties and Ian Chamunora Nyalungwe
Haruperi - SCZ Appeal No. 222/2013
7. Nkongolo Farms Li'Tlited v Zambia National Commercial Bank Limited,
Kent Choice Limited (In Receivership) and Charles Huruperi ,
8. Corpus Legal Practitioners v Mwanandani Holdings Limited - SCZ
Judgment No. 500f2014
9. Aristogerasimos Vangeletos and another v Metro [;'1vestments Limited and
others - SCZ Ruling No. 21 of 20 13
10. New Plast Industries v The Commissioner of Lands and another - SCZ
Judgment NO.8 of2001

Statutes referred to:

1. High Court Act, Cap 27, s. 13 and Order 6, r. 1, O~der 30, r. 11 and r. 14
2. RSC 1999, Order 15, r. 4 and 5, Order 28, r. 8 and Order 88, r. 1
3. Companies Act, Ca.p 388, s.2

Other works referred to:

1. Fisher and Lightwood Law of Mortgage 14th Editicn, 2014 para. 1.3
2. Chitty on Contracts-General Principles, 1999, para 12-095 and 12-096, 26th
ed para 772, 28th ed para 22-001
3. Ewan Mckendrick, Good on Commercial Law 4th Edition 2010 Bookwell,
Finland pp. 671, 674 and 675
4. Osborn's Concise Law Dictionary, 12th Edition 2013 p. 79
5. Halsbury's Laws of England, Volumes 9, 12, and 32, 4th Edition
6. The Encyclopedia :JfCourt Forms and Precedents in Civil Proceedings, Lord
Atkin, Volume 11, Butterworth & Co.(Publishers) Ltd, 1948 pp. 399-400
 J3

721

This appeal is against a decision of the High Court at Lusaka

dismissing the appellant's action in its entirety.

The brief facts relevant to the appeal are that on 30th

November, 2011 the appellant availed the 1st respondent a 12

months advance payment guarantee facility in the sum of

KI4,510,466.62 for the purpose of performing on contracts awarded

by the Ministry of Education and Ministry of Local Government and

rehabilitation of selected urban roads in Lusaka. The facility was

also for a sum of US$700,000 for a letter of credit facility.

The borrowing was secured by a third party mortgage over

Stand No. 11989, Chudleigh, Lusaka owned by the 2nd respondent.

The third party mortgage was executed by the appellant, and the 1st

and 2nd respondents. Prior to that, in a letter of undertaking and

consent dated 5th December, 2011, the 2nd respondent had

consented to the creation of a third party mortgage over his

property in favour of the appellant. The facilities were also secured

by a fixed and floating debenture dated 5th December, 2011 over all

the assets of the 1st :-espondent and personal guarantees of the 3rd

to 6th respondents dated 29th November, 2011.

 J4

722

On 15th November, 2012, before the expiry of the facility, the

1st respondent applied for and was granted a 1:ridging loan facility,

continuation of a term loan, continuation of an advance payment

guarantee facility and continuatio:J. of a letter of credit in the total

sums of KI7,124,114.69 and TJS$700,000 to enable the 1st

respondent meet working capital requirements relating to purchase

of materials and hire equipment on the contract for the

rehabilitation of selected urban roads in Lusaka, to commence

works on a new contract with Zambia Revenue Authority of building

semi-detache::l staff houses at Chirundu Border, and to enable the

1st respondent to cor_tinue to perfoJrmon contracts awarded by the

Ministry of Education for constn.::.ctionof high schools in Chiengi

District and in Samfya and for rehabilitation of selected urban

roads in Lusaka.

According to the appellant, the additional borrowing was also

secured by the third party mortgage over Stand No. 11989

Chudleigh since the mortgage contained provisions indicating that

it was continuing security for all future, ad::litional and further

facilities and adva...ces; and by the personal guarantees of the 3rd to

 J5

723

6th respondents as clause 3 of the guarantees also stipulated that

the guarantee was a..!d at all times shall be a continuing security

and shall extend to cover the ultimate balance due at any time from

the principal debtor to the creditor under or in respect of any of the

facility documents.

Admittedly, the appellant did not inform the 2nd respondent

that it would be granting further advances or additional facilities to

the 15t respo:1dent. The 15t respondent defaulted on its repayment

obligations and the appellant effected several demands for the

outstanding sum from the respondents. On 10th September, 2013,

the 15t respondent through the 3rc. respondent, its Country director

admitted its indebtedness to the appellant in the sum of

Kll,OOO,OOO
and proposed settlement in installments.

Subsequently, the appellant commenced proceedings by

originating summons against the SL,{ respondents seeking, for

payment of all monies which as at 13th May, 2014 stood at

KIL,203,809.41 from the main loan account, K4,491,237.66 from

the main current account, K657,610.69 from the Treasury account

and US$14,166.37 from the US current account with interest at the

 J6

724

agreed rate of 19.25% per annum and other charges due and owing

to the appellant on the two facilities; foreclosure, possession, and

sale of the mortgaged property; an order that the 3rd to 6th

respondents honour their personal guarantees; any other relief the

court may deem fit; and legal costs.

The court process was served through substituted servIce by

advertising. Only the 2nd and 4&.respondents filed affidavits in

opposition, and admitted that the 1st respondent was availed the

first facility and that the 2nd respondent consented to provide his

property as security, but alleged that the first facility was paid in

full and that the 2nd respondent did not consent for his property to

be used as security for any further borrowing by the 1st respondent.

Apparently, the other respondents could not be traced.

At the hearing of the originating summons, only the appellant

and the 2nd respondent attended. In his judgment delivered on 17th

April, 2015, the learned trial judge first discussed the relief that is

obtainable under Order 30, rule 14 afthe High Court Rules, Cap 27

and Order 88, rule 1 RSC 1999. The learned juc.ge then found that a

claim by a mortgagcr or mortgagee would only fall within the realm

 J7

725

of a 'mortgage action', if and only if, such mortgagor or mortgagee

relies on the mortgage in making his claim.

The learned judge found support in the case of National

Westminster Bank v Kitehl where the court was of the view that the

claim for payment of money secured by a mortgage only falls within

the definition in Order 88 rule 1(l)(a) of the RSC if the plaintiff is

relying on the mortgage to make such claim ar_d that the mere fact

that the moneys claimed are secured by a mortgage does not of

itself bring the action within the definition of a mortgage action.

The learned judge then opined that an criginating summons

issued under Order 30, rule 14 of the High Court Rules and Order

88, rule 1 of the RSC cannot be used to make any claim which does

not arise under a I:lOrtgage and that where a party seeking to

enforce a mortgage also claims relief which do not arise under the

mortgage, the appropriate course of action is 'generally' to

commence the proceedings by way of writ of summons.

Furthermore, the learned judge found as a fact that a third

party mortgage was executed to secure the repayment of the initial

loan facilities which the 1sl respondent obtainec: from the appellant
 J8

726

and that since the appellant's assertion was H'_atthe loan facilities

specified in the facijty letter of 15th November, 2012 were also

secured by the same third party mortgage, the claims for payment

of the sums claimed, foreclosure, possessicn and sale of the

mortgaged property would be said to have arisen under the

mortgage notwithstanding the 2nd respondent's assertion to the

effect that the mortgage only related to the initial facilities.

Regarding the claim against the 3rd to 6th respondents, the

judge found that it related to personal guarantees and had nothing

to do with any mortgage and fell outside the scope of the remedies

which could be granted in the action, as such it would be

incompetent to consider the merits of the said claim; and that the

appellant was at liberty to engage alternative court process to

enforce the guarantees and the debenture. For that reason the

judge declined the appellant's attempt to apply for leave to enter

judgment in default c..gainstthe 3rd to 6th respondents.

With regard to the claims relating to the mortgage and the 2nd

respondent's defence that the loan facility secured by the third

party mortgage was repaid in full, the learned judge found that the
 J9

727

third party mortgage was created in respect of specific loan

facilities. He referred to the title of the mortgage deed and the letter

of undertaking and consent signed by the 2nd respondent, both

which he said confirmed that the 2nd respondent's consent was in

respect of tr_e sums of K14,510,466,621.00 and US$700,OOO.OO

and found that those were the specific sums the parties had

intended to and were secured by the mortgage.

The judge rejected the suggestion by the appellant that the use

of the words 'other obligations' in the letter of consent meant that

the consent extended to other subsequent faciEties and that in any

event, 'other obligations' was too ambiguous an expression to mean

anything specific in the absence of a satisfactory explanation as to

what the parties referred to thereby.

The judge was elso of the view, after examining the clauses of

-he third party mortgage deed (to which his attention was drawn),

on behalf of the appellant, in a bid to show that the mortgage was

created as a continuing security, that the said clauses were not, in

any way, intended to allow the 1st respondent to borrow at will from

-he appellant, upon the security of the third party mortgage.

 11J

728

The judge also opined that though recital 2 of the mortgage

deed made reference to "future facilities", it would be absurd to

suggest that the mortgage was intended to give latitude to the 1st

respondent to bor:-ow limitlessly without consulting the 2nd

respondent and expect that all its borrowings would be secured by

the third party mortgage and that this was not clearly the intention

of the parties.

The judge further found that it was incumbent upon the

appellant to obtain further consent from the 2nd respondent and to

create a further charge if it sought to secure :he subsequent loan

facilities by way of a mortgage in respect of the subject property and

tha- in the absence of such further charge, the third party mortgage

would not cover those facilities.

In addition, the judge found that smce the loan facilities

secured by the third party mortgage were repaid in full, the

appellant's claims against the 1st and 2nd respondents could not be

sustained under that cause; and that the court could not order the

1st and 2nd respondents to pay the sums being claimed as the

repayment was not secured by the mortgage. Ultimately, the judge

 J1:

729

held that the claims for foreclosure, posseSSion and sale of the

mortgaged property had no basis as the mortgage was redeemed

when the facilities secured were paid in full.

There was another defence which the 2nd respondent had

raised. This was to the effect that the family :-elationship between

him and his uncle Ellington Haruperi, on whose his request, he had

executed the third party mortgage raised an irrebuttable

presumption of undue influence which the appellant ought to have

taken note of and taken steps to ensure that h:s consent to execute

the mortgage was obtained without undue influence. The cases of

Royal Bank of Scotland v Etridge2 and Barclays Bank PIc v 0' Brien3

were relied on.

Counsel for the 2nd respondent had alSO argued that the

appellant exerted undue influence on the 2nd respondent when it

caused him to secure further facilities obtained by the 1st

respondent when his understanding was that the third party

mortgage was only intended to secure the initial facilities and put

him in a manifestly disadvantaged position. The case of National

Westminster Bank PIc v Morgan4 was quoted to support this

 112

730

argument. The case of National Westminster Bank Pic v Alfonso and

Otherss was also cite:! in which it was argued, that the court held

that in order for a guarantee to be enforceable against a third party,

the bank must have ensured that the guarantor was involved in the

business and if not, that the guarantor obtained independent legal

advice. However, the learned judge did not consider this defence

which he found otiose because he had already found that the

mortgage was paid off in full and discharged.

The appellant has now appealed on three grounds. We shall

first discuss ground 1 and then grounds 2 and 3 at once. The first

ground alleged that :he trial judge failed to uphold the sanctity of

contract when he held that it was incumbent upon the appellant to

obtain further consent from the 2nd respondent and to create a

further charge if it sought to secure the subsequent loan facilities

by way of mortgage of the subject property contrary to the express

provisions of the duly signed and registered third party mortgage.

In support of this ground, counsel for the appellant has cited a

number of authorities which we will take into account in our

judgment. He quoted Fisher and Lightwood's Law of Mortgage, 14th

 J13

731

edition, 2014 paragraph 1.3 at page 4 which defines a mortgage as a

--ormof security created by contrac: conferring an interest in real or

personal property defeasible UP0::1 performing the condition by

paying a given SurL of money with or without interest or on

performing some other condition.

He also cited Chitty on Contracts, 26th edition, Volume 1,

paragraph 772 where it is stated that where the agreement of the

parties has been reduced into writing and the document containing

the agreement has been signed by one or bob of them, it is well

established that the parties signing will be bo".md by the terms of

:he written agreement whether or not he has read them or whether

or not he is ignorant of their precise legal meaning.

He further cited Chitty on Contracts, VOlume 1, 28th edition,

paragraph 22-001 where it is stated that a party to the contract

must perform exactly what he undertook to dc and when an issue

arises as to whether performance is sufficient, the court must first

construe the contract.

He then submitted, in brief, that the terms and conditions of

the third party mortgage which was duly signed by the 1st and 2nd
 J14

732

respondents must be enforced. That the learned trial judge

misdirected himself by holding that further consent of the 2nd

respondent was required in order for the appellant to rely on the

third party mortgage as security to cover the subsequent facility,

and was wrong in failing to uphold what the parties had expressly

agreed in the third party mortgage.

It was also argued that nowhere m the mortgage deed was

consulting the 2nd respondent made a condition to borrow on the

held security and that the 2nd respondent's cansent to pledge his

property as security was without any restriction and the intention

of the parties is discernible from the document itself. Counsel also

relied on our recent decision in the case of Kalusha Bwalya v

Chadore Properties and Ian Chamunora Nyalungwe Haruperi6•

It was further submitted that as the mortgage deed expressly

provided that it was up to the 2nd respondent as mortgagor to

request for the discharge of the mortgage, the mortgaged property

could only cease being continuing security once the 2nd respondent

had notified the appellant, which he never did at the time the

appellant advanced the additional facility to the 15t respondent.

 J15

733

It IS also the appellant's argument that there being a duly

signed mortgage deed as a binding contract and continuing

secu.rity, extrinsic evidence should not have been admitted to vary

or contradict the express terms 0:- the contrac:; and that the letter

of undertaking and consent was signed by the 2nd respondent

before the mortgage deed, hence what was of paramount

consideration was the mortgage deed.

In response, counsel for the 2nd respondent submitted that the

agreement between the parties is not to be in:erred from the third

party mortgage alone, but also from the letter of consent and the

facility letter of 30th November, 2011. We were referred to Chitty on

Contracts-General Pr.nciples 1999. paragraph 12-095 regarding the

scope of the parole evidence rule.

It was also submitted that the third party mortgage was

executed by the parties in order to secure repayment of the initial

loan facility, which is evident from the mortgage deed, the facility

letter, and the certif:.cate of title of the mortgaged property. That it

was not in dispute that the sums secured by the third party

mortgage were repaid by the 1st respondent or that the appellant

 J16

734

did not inform the 2nd respondent about the further facilities which

were provided to the 151 respondent.

It was further argued that the words 'other obligations' used in

the mortgage deed and consent letter are vague in the absence of a

satisfactory explanation as to the meaning; and that following the

payment of the sums secured by the mortgage the attachment of

the 2nd respondent's property ceased. We were also referred to Ewan

Mckendrick, Good on Commercial Law 4th Edition 2010 at pp. 671,

674 and 675. It was then argued that the only existing obligation at

the time of execution of the mor:gage deed was repayment of the

sums comprised in the initial facility and not the later facilities

availed to the 151 respondent without the 2nd respondent's consent.

It was also contended that clauses 2 and 8 of the mortgage

deed did not give the 151 respondent a green light to borrow at will

on the strength of the third party mortgage; that the parties to the

mortgage did not intend that the same extends to the 151

respondent's indebtedness which would arise later; and that the

appellant ought to have obtained further consent from the 2nd

respondent before securing later facilities or ought to have created a

 J17

735

further charge, even if the mortgage was created as a continuing

security (which is deded).

We have considered the arguments and the authorities cited in

support of the parties' respective positions on this ground of appeal.

The fact that the apI=ellant availed the 1st resp,::mdent a 12 months

advance payment guarantee in the sum of K14,51O,466.62 and the

sum of US$700,000.00 for 12 months letter cf credit facility; and

that the 2nd respondent consented to the creation of a third party

mortgage over his property, being Stand No. 11989 Chuldlegh,

Lusaka as security for the said faci ity is not in dispute.

The 2nd respondent's argument is that the mortgage only

related to this first facility. We agree with the 2nd respondent and

the learned trial judge that both the first facility letter dated 30th

November, 2011 and the third party mortgc..ge deed dated 12th

December, 2011 mention the specific sums of K14,510,466.62 and

USS700,000.00 as the actual sums advanced and secured by the

mortgage. So does n"_esigned and sealed letter of undertaking and

consent delivered by the 2nd respondent dated E,th December, 2011.

 Jl3

736

In our view, however, there is more to the third party mortgage

than the 2nd respondent admits. Clearly, the action in the court

below centered on the construction of the d::Jcuments that were

before the court. It is trite that the interpretation of a written

document is a matter of law for the court. The function of the court

is to ascertain wha~ the parties meant by the words which they

have used; to declare the meaning of what is written in the

instrument, not of what was intended to have been written; and to

give effect to the intention as expressed. The object is to discover

the real intention of the parties and the intention must be gathered

from the written instrument read in the light of such extrinsic

evidence as is admissible for the purpose of construction. It is not

permissible to guess at the intention of the parties and substitute

the presumed for the expressed intention (Halsbury's Laws of

England, Volume 12, 4th Edition at paras 1460 and 1461).

In this particular case, as rightly observed by the learned trial

judge, recital 2 in the mortgage deed states that the mortgage over

the properties in favour of the Bank was to secure the repayment of

the principal monies and payment of all interest, costs, commission

 J19

737

and all other accessones thereon, whether under that facility or

otherwise including future facilities or additional, further or

otherwise under any facility as may from time to time be varied,

extended or replaced for which the 15t respondent may be or become

liable to the Bank on any current or other accounts or in any

manner whatsoever.

Further, recital 3 read that the customer and the mortgagor

had agreed to accept the facility ane: the other accommodation

granted to the customer by the Bank, upon having such advances

secured in the manner therein after appearing.

Coming to the operative part of the mortgage deed, in clause 1,

the customer covenanted with the Bank to pay and discharge on

demand all monies and liabilities whether certain or contingent

then or thereafter owing or incurred to the B311kfrom, or by the

customer including present and future facilities or advances

whether additional, further or otherwise under any facility as from

time to time varied, extended or replaced upon any current or other

account or in any manner whether alone or jointly with any other

 J20

738

person and whether as principal or surety and in whatever name or

firm including ...

In clause 3, the mortgagor as beneficial owner and in

consideration of the sums of ZMW14,510,466,621.00 and

US$700,OOO.OO
(the receipt of which the customer and mortgagor

acknowledged) demised unto the Bank the property in issue

together with all the unexhausted improvements thereon subject to

the provisions relating to redemption therein contained provided

always that if all the monies thereby secured and therein before

covenanted to be paid shall be duly paid then the Bank shall at the

request and cost of the mortgagor and customer execute a

discharge of the mortgage relating to the property.

And in clause 4, it was agreed that the mortgagor would at any

time if and when required by the Bank to do so, execute to the

Bank or as the Bank shall direct, such further legal or other

mortgages or charges as the Bank shall require of, and on the

mortgagor's estate and interest in the premises comprised in the

said deposited deeds and writings or which may thereafter be

acquired by and belong to the mortgagor (including any vendor's

 J23

741

obligations" is not the same as "other facilities" and found that the

words "other obligati:ms" is too ambiguous an expression to mean

anything specific in the absence of a satisfactory explanation as to

what the parties referred to thereby.

In our view, there can be no doubt from a reading of all the

above mentioned covenants in the mortgage deed, using the

grammatical and o:-dinary sense of the words, that the 2nd

respondent agreed to his property being used as security not just

for the initial facility granted In the specific sums of

K14,510,466.62 and US$700,OOO.OO.but also as continuing

security for any further facilities or future advances. The question is

whether that was the real intention of the parties.

It is quite clear that recital 2 in the mortgage deed, which the

learned trial judge quoted in full, supports the operative clauses in

the mortgage deed and the appellant's contention that the security

was a continuing security and covered further advances and other

banking facilities, including future facilities.

In the letter of undertaking and consent which the 2nd

:-espondent voluntarily and willingly executed, be indicated that he

 J24

742

was fully aware of (i) the nature and extent of the security intended

to be created, (ii) the 1st respondent's obligation to redeem or settle

the facility that had been availed to it by the appellant, and (iii)the

appellant's recourse to exercise its rights of enforcement over the

property in the event of the customer's default in complying with its

repayment obligations and other obligations to the bank

(underlining ours for emphasis).

As we have already said the letter of undertaking and consent

was written on 5th December, 2011 before the execution of the

mortgage deed and as submitted by counsel for the 2nd respondent

the document should be read together with the first facility letter

and the mortgage deed. When this is done the oeaning of the words

"other obligations" b:>th in the letter of undertaking and consent

and in the mortgage deed become very clear and can easily be

interpreted to mean 'other facilities' or ':-urther advances', We do not

see any ambiguity at all in these words and the real intention of the

parties when they signed the mortgage deed can very easily be

discerned from the documents, which is that the security was

continuing security for further facilities or further advances.

 J25

743

Counsel for the 2nd respondent has also spiritedly argued that

because of the relationship that existed between the 2nd respondent

and his uncle who was involved in a business transaction with the

1st respondent and on whose request he executed the third party

mortgage, there was an unirrebutable presumption of undue

influence and that the appellant should have ensured that the 2nd

respondent was advised to seek independent legal advice especially

that he did not benefit from the facilities that were granted to the 1st

respondent by the appellant.

On the other hand, it IS the appellant's argument that the

Issue of undue influence was :-lot pleaded in the affidavit in

opposition to originating summons and therefcre, cannot be raised

now and that there is no cross-appeal on the issue.

We agree with the appellant that undue influence was not

:-aised by the 2nd respondent in his affidavit in opposition but there

was evidence in cross-examination on the relationship between him

and his uncle and in her submissions, counsel for the 2nd

respondent had made the same argument as she has done now.
 J26

744

However, we agree with the appellant that the learned judge did not

determine the issue cn the merits and that there is no cross-appeal.

Even if there was, the defence would still fail. Undue influence

IS defined by Halsbwy's Laws of England, 4th edition, Volume 9 as

"the unconscientious use by one person of power possessed by him

over another in order to induce the other to enter into a contract."

And in allowing the appeal in the case of Nkongolo Farms Limited v

Zambia National Commercial Bank Limited, Kent Choice Ltd (In

Receivership) and Charles Hurupen7, we held, inter alia:

"(5) The law imposes on a creditor a dli.ty to take steps to ensure that not
only does a borrower or debtor not exercise undue influence and or
make false representation to a surety, but c.lso that the creditor has
a duty to ensure that a surety has adequc.te understanding of the
nature and effect of the transaction in question.

(6) The creditor has the obligation to inform itself as to whether or not
there is a rebtionship of trust and confidence between the borrower
and guarantDr, and the attendant risk to abuse that relationship.
The Bank has the further obiigation to ensure that the guarantee did
not in any way exercise undue influence on ~he guarantor. "

As the learned trial judge observed, undue influence makes a

contract voidable at law. The question is did the 2nd respondent's

uncle exert any undue influence on him before he executed the

third party mortgager We do not think so. It is patently clear that

 J27

745

the 2nd respondent does not dispute sIgmng the mortgage deed

which he admitted he did freely and voluntarily. What he has a

problem with is the further facility which was obtained by the 1st

respondent without his consent. Clearly, the English cases heavily

relied upon by for the 2nd respondent are inconsequential as

circumstances in those cases were totally different from this case.

What remains for us to resolve is simply whether the appellant

discharged its duty to ensure that the 2nd respondent had adequate

unc.erstanding of the nature and effect of the third party mortgage.

This is in view of the fact that the third party mortgage was not

limited to the principal sums mentioned therein but also provided

cover for further facilities or further advances.

The 2nd responc.ent testified, in the court below, that he is a

businessman and he holds a Bachelor of Science degree in

economics; that he had before pledged title deeds as security to the

appellant bank before the mortgage in question; that he had signed

a mortgage deed before; and that it was prudent for him to read

before signing. The 2~d respondent had also testified that he only
 J23

746

read the cover of the mortgage deed because his knowledge of the

transaction and the consent letter he signed were for specific sums.

From this evidence, and even if there was no evidence that the

appellant had advised the 2nd respondent to seek independent legal

advice, it is discernible that the 2nd respondent is an adult of full

capacity who is well educated, and who is highly literate and well

exposed, having executed similar contracts or mortgages with the

appellant bank previously. The 2nd responc.ent may not have

oenefitted from pledging his property as security, but he signed the

mortgage deed voluntarily and willingly and without any pressure

from the appellant or his uncle a.ld, he cannot be heard to argue

that the appellant did not ensure that his consent to execute the

mortgage was obtained without undue influence.

In our view, there is also no evidence to show that the

appellant misled the 2nd respondent into securing further facilities

obtained by the 1st respondent when his understanding was that the

third party mortgage was only intended to secure the initial facility.

The burden was on tl'"e2nd respondent to prove other vitiating

 J29

747

factors such as fraud, mistake or misrepresentation that could have

rendered the mortgage voidable, but he failed to do so.

In the Kalusha Bwalya6 case which, althcugh not on all fours,

IS strikingly similar to this case and to which the 2nd respondent

was also a party, we provided guidance as to tr_econstruction of the

intention of the parties when executing written contracts. In that

case, the appellant alleged that he executed a contract of sale and

assignment in favour of the respondents as security for the sum of

US$26,250 that he got from them. He argued that the intention of

the parties was not to transfer or sell his house situate in Lusaka's

Woodlands area but simply for them to hold it as security.

We held, among others, that the intention of the parties was

discernable from the documents signed by the parties freely and

voluntarily as the acknowledgment of receipt on the record of

appeal confirmed. Tr_atthe parties chose to embody their agreement

in two documents, namely, the contract of sale and the deed of

assignment and they were bound by those documents in the

absence of fraud, mistake or misrepresentation. We also reiterated

the position of the law that extrinsic evidence is not generally

 J3C

748

admissible to add to, vary, subtract from, or contradict the terms of

the written contract.

In this case, even if the operative part of the mortgage deed in

clause 4 mentioned further legal or otr_er mortgages or charges, we

can only agree with counsel for the appellant that there is no

provisi~n in the mortgage deed that required the appellant to obtain

consent from the 2nd responden+ before any further advance or

facilities could be availed to the 1st respondent. The 2nd respondent

agreed to the terms of the mortgage deed and he is bound by it.

Indeed, it is axiomatic that the sanctity 0: contract must be

preserved and agreements which are freely and voluntarily entered

into by the parties must be enforced by the cou::-tsof law.

Indeed, it was incumbent upon the 2nd respondent to notify

the appellant as mortgagor of his wish to discharge the mortgage

before the appellant advanced the additional facility to the 1st

respondent. Therefore, we find merit in ground one of this appeal.

The second ground of appeal attacked the trial judge for

holding that there was no mortgage and consequently dismissing

the entire action on ground that it ought not to be commenced as a

 J31

749

mortgage action ignoring the Deed of Debenture creating a fIxed

and floating charge ever the 1st respondent's assets which was also

part of the security being enforced.

In support of this ground counsel for the appellant fIrst quoted

the defInition of 'debenture' and 'charge', in section 2 of the

Companies Act, Cap 388, in Osborn's Concise Law Dictionary, 12th

Edition 2013 at p. 79 and, in Fisher and Lightwood Law of Mortgage

14th Edition 2014 pa~agraph 1.3 and reiterated that the third party

mortgage covered the subsequent additional, further and future

facilities. The gist of his argument is that the action was properly

commenced as a mortgage action and that even if the trial judge

found that the claimed sums were not secured by the mortgage, he

still should have held the 1st respondent liable under the action

because there was c. signed debenture deed which is a charge on

the assets of the 1st respondent and charges cover all forms of

security which if stretched includes personal guarantees.

It was also argued that the judge's dismissal of all claims and

suggestion of recovery by recommencing the action by writ is

erroneous in view of the debenture whose terms also covered future

 132

750

facilities as it was also a continuing security. Further, that the

judge having ordered that the deponents of the affidavits be cross-

examined, essentially turned the action into a trial, and the

affidavits stood as pleadings, while the exhibits were the documents

relied on in line with Order 28 rule 8 RSC, so no different objective

could have been achieved by commencing the action by writ.

On the other hand, the essence of the 2nd respondent's

submission on this ground is that the facilities intended to be

secured by the mortgage were paid in full, so the appellant could

not seek orders for foreclosure, possession and sale of the

mortgaged property, hence the trial judge holding that there was no

mortgage. Further, that the wording of Order 30, rule 14 suggests

that an originating summons can only be taken pursuant to that

Rule if the action is strictly a mortgage action and that a mortgage

action is distinct from an action to enforce a debenture. The case of

National West Minister Bank v Kitch} is again reEed on.

The third ground of appeal attacked the trial judge's holding

that the claim for enforcement of personal guarantees against the

3rd to 6th respondents could not be made under a mortgage action

 133

751

for being outside the scope of the remedies which could be granted

under a mortgage action commenced by originating summons.

The main argument made by counsel for the appellant based

on Order 30, rule 11 of the High Court Rules is that enforcement of

personal guarantees require the interpretatio::l of the terms and

provisions of the written documen- in order to pronounce the rights

of the parties; that the appellant in its claims was not only

enforcing the irrevocable personal guarantees but the third party

mortgage and debenture which could properly ':Jedone under Order

30, rule 14; and that a guarantee is merely secondary security and

a judgment creditor only turns :0 the guarantee if the primary

security is not adequate to payoff the debt.

Alternatively, it was contended, on the authority of the case of

Corpus Legal PractitIOners v Mwanandani Holdings LimitedB that

there would be multiplicity of actions if parties were to apportion

their claims in piecemeal, and that a guarantee could be enforced

together with other relief in the manner commenced in this matter.

In response, counsel for the respondent argued that the claim

for enforcement of the personal guarantees coul::inot be made

 J34

752

under a mortgage action as a personal guarantee is neither a

mortgage nor a charge so as to entitle a beneficiary of the guarantee

to remedies of a mortgagee or charge holder.

Halsbury's Laws of England, 4th Edition, ~Tolume32 paragraph

804 was cited as authority where the learned authors explain what

a mortgage action is. It was argued that in this case, the appellant

did not rely on the :nortgage to enforce the personal guarantees;

-hat none of the relief provided for under Order 30, rule 14 of the

High Court Rules can be used to enforce a guarantee and so Order 6

rule 1 of the High Court Rules becomes applicable. The cases of

Aristogerasimos Vangeletos and another v Metro Investments

Limited9 and New Plast Industries [;The Commissioner of Lands and

anotherlOwere cited for this argument.

We have considered the arguments by the appellant and 2nd

respondent on the two grounds of appeal. As we have already said,

the rest of the respondents have not participated in this appeal and

they failed to defend the matter in the court below even though the

4th respondent had filed an affidavit in opposition. However, we are

alive to the general rule that joinder of parties, whether as plaintiffs

 •

J35

753

or as defendants is allowed where the right to relief is in respect of

or arise out of the same transaction or series of transactions; and

there is some common question of law and fact (Order 15 r. 4 RSC).

And in the same way, any number of causes of action, whether

joint or separate, may be joined in one action, subject to the power

of the court to order that the action be confined to those causes of

action that can be conveniently disposed of together or that any

cause of action be excluded or that separate trials be held, if the

joinder of causes of action or of parties, as the case may be, may

embarrass or delay the trial or is otherwise inconvenient (Order 15,

r.5 RSC).

The principal objective of these provisions is to ensure that a

:nultiplicity of actions is avoided where all issues can be brought

together properly and conveniently and dealt with in one action.

We are also alive to the fact that applications by originating

summons are appropriate where the decision depends on the

construction of an instrument or statute or the granting of relief in

mortgage proceedings; and that the court has refused in practice on

an originating summons to decide questions of priority or disputed

. ' .
J36

754

questions of fact on the ground that procedure by originating

summons is only imended for the decision of simple questions of

fact; so that where there are several conflicting affidavits such

procedure is obviously neither convenient nor expedient (The

Encyclopedia of Court Forms and Precedents in Civil Proceedings,

Volume 11, pp. 399-400).

It also seems t::>us that originating summons IS appropriate

for determining questions of fact pertaining to questions of

construction, but not for determining questions both of fact and

construction where a decision on the latter would not necessarily

put an end to the question. When, however, it appears to the court

that its decision on the construction of a written instrument will

satisfy the proceedings then at issue, the court will not refuse a

decision on the possibility of further litigation arising in connection

with matters not directly before it (The Encyclopedia of Court Forms

and Precedents in Civil Proceedings, p. 400).

In addition, where, in a matter begun by originating summons,

it appears to the court that the matter should have been

commenced by writ of summons, the court has power under Order

iii '. .•

137

755

28, rule 8 RSC, at a:1Ystage of the proceedings, to order that the

proceedings should continue as if the matter had been so begun

and may, in particular, order that any affidavits shall stand as

pleadings and give fu::-therdirections on the conduct of the matter.

Even though the principal debtor is the person primarily liable

:0 the creditor for the debt or default answered for by the surety

and even if the principal debtor is not a party to the surety's

contract to be answerable to the creditor although sometimes

bound by the same instrument as his surety, it is not uncommon

for claims in a mortgage action to be joined to a claim for

enforcement of personal guarantees even though a guarantee is a

contract ancillary and subsidiary to some other contract or liability

on which it is founded, but without which it must fail.

In this case, a debenture and personal guarantees do not,

strictly speaking, fall under a mortgage action, but the question

that was before the court below was really one of construction of the

documents executed by the parties to secure the facilities granted to

the 151 respondent and the rights to the relief claimed arose out of

the same transaction or series of transactions as the facilities were

• •
J38

756

secured by the third party mortgage, personal guarantees and the

debenture. Further in our view, the court's decision on the

construction of the written instruments would have satisfied the

proceedings then at issue and avoided a multiplicity of actions.

In the case of Corpus Legal Practitioners v Mwanandani

Holdings Limited8, we took the view, looking at the circumstances of

the case, that to insist that the claim for removal of the caveat must

be brought in a separate action, commenced by way of originating

summons, would aoount to asking that different claims in that

case, although involving the same parties and arising from the

same set of facts be severed and brought in separate actions which

in turn, would amount to multiplicity of actions, a practice which

we have always frowned upon. This is still a sound legal position.

The appellant's argument that as the court had allowed the

cross-examination of the deponents of the affidavits, which was

tantamount to a tricJ in which any contentious issues could have

been heard and determined, there would have been no need for the

appellant to recommence the matter by writ in line with Order 6 rule

1 of the High Court R:.lles has merit, especially that the causes of
• • •

J39

757

action that were joined could be conveniently dealt with together

and involved simple questions of fact. The cases of Aristogerasimos

Vangeletos and another v Metro Investments Limited9 and New Plast

Industries v The Commissioner of Lands and anotherlO relied on by

the 2nd respondent are not available to him.

In our view, the learned trial judge should also have entered

judgment as requested by the appellant both -~nder the debenture

and personal guarantees which we:-enot defended, particularly that

section 13 of the High Court Act, Cap 27 mandates the court or the

judge to resolve all issues in dispute between the parties. For these

reasons, we find merit in grounds two and three of the appeal.

All the three grounds of appeal having succeeded, the sum

total is that the appeal is allowed. Consequently, judgment is

hereby entered in favour of the appellant against the 151 respondent

for the sums of KI4,203,890.41 from the main loan account;

K491,237.66 from the main current account; K657,610.69 from the

Treasury account (all in rebased Kwacha) and US$14,166.37 from

the US$ current account, respectively, together with contractual

interest at 19.25%, to be paid within 30 days from date hereof.

 ---
-_.:.
~-::
=
~
.~~
In the event thaI the judgment debt and interest remain

unpaid at the expiry of the stated period, then the 2nd respondent

shall deliver vaca.p.t,Possession of the mortgaged property being

Stand No. 11989 situate in the Lusaka Province of the Republic of

Zambia to the appellant who shall be at liberty to foreclose and

exercise its right of sale.

Further, the appellant shall also exerCIse its right as

debenture holder over the assets of the 15t resp:mdent in settlement

of the judgment debt. Should the:-e be any amount due after the

sale of Stand No. 11989, Chudleigh, Lusaka and enforcement of the

debenture, then the 3rd, 4th, 5th, and 6th respondents shall pay the

difference as guarant~rs.

We award costs to the appellant, to be taxed III default of

agreement .
...-=z==g>c? C_,-- ( t
I
c !
J

H. CHIBOMBA E. M. HAMAUNDU
SUPREME COURTJUDGE SUPREME COURTJUDGE

~- -~. ;-.
SUPREME COURTJUDGE
~:~-----