IN THE COURT OF APPEAL OF ZAMBIA APPEAL NO.

112/2020
HOLDEN AT KABWE

(Civil Jurisdiction)

BETWEEN:

STANBIC BANK ZAMBI APPELLANT

AND

BRUCE MWEWA RESPONDENT

CORAM: CHASHI, LENGALENGA AND NGULUBE, JJA.

On 14th October, 2020 and 23rd October, 2020

For the Appellant: Mr. L. Mwamba, Messrs Simeza, San gwa and
Associates

For the Respondent: Mr, C. Sianondo, Messrs Malambo and Company

JUDGMENT

NGULUBE, JA delivered the judgment of the Court.

Cases referred to:

1. Gemstar Holdings Limited vs Afgri Corporation Limited, SCZ Appeal Number 183
of 2014
2. Livingstone vs Raw yards Coal Company (1880) 5 App Cas 25
3. Chrismar Hotel Limited vs Stanbic Bank Zambia Limited, SCZ Selected Judgment
Number 6 of 2017
4. Finance Bank Zambia Limited and others vs Simataa Simataa, SCZ Selected
Judgment Number 21 of 2017
 -J2-

5. Zambia National Building Society vs Ernest Mukwamataba Nayunda, SCZ

Judgment No. 11 of 1993
6. Robinson vs Harman (1848) 1 Exch 850
7. Hadley vs Baxendale (1854) 9 Exch 341

Legislation referred to:

1. Value Added Tax Exemption Order 2014, Statutory Instrument Number 68 of 2014
2. Value Added Tax Act, chapter 331 of the Laws of Zambia

Other works referred to:

1. Mulenga, Muhamed, Taxation in Zambia, Law and Practice, Multimedia Zambia,

2003
2. Haisbury's Laws of England, 4th edition, Volume 9 paragraph 1174

INTRODUCTION

1. This appeal emanates from a decision of the High Court delivered

by Mwenda - Zimba, J. on 29th April, 2020, in which the court

found that the respondent had largely proved his case on a

balance of probabilities and entered Judgment in his favour. The

court further found that the appellant had failed to prove its

counterclaim as it ought not to have paid the entire VAT for the

lease to the Zambia Revenue Authority at once. The court

accordingly dismissed the counterclaim and awarded costs to the

respondent.

2. The respondent commenced an action in the lower court by

amended writ of summons and statement of claim seeking an

 -J3-

order and declaration that the purported debit above the

legitimate amount to the respondent's account at the instance of

the appellant was without authority and illegal. The respondent

further sought an order and declaration that the purported

withholding of the insurance gain was illegitimate, an order for the

refund of ZMW5 1,005.39, damages for breach of contract,

damages for mental anguish, aggravated damages, general

damages, damages for loss of business with interest from the date

when the amounts were deducted, with costs.

BACKGROUND FACTS

3. The respondent entered into a lease agreement with the appellant

for the purchase of a ford ranger, registration number ALV 3349,

which was later involved in an accident and was rendered

irreparable. This terminated the first lease. In September, 2015,

the appellant and the respondent entered into a second lease

agreement for the purchase of another ford ranger, registration

number BAA 8367, with a monthly repayment instalment of

ZMW12,8 18.5 1.

4. In November, 2016, the second lease repayment was increased to

the amount of ZMW14,846.82 and when the respondent inquired

from the appellant regarding the increase, he was infoi iiied that it
 -J4-

was due to an amount of ZMW40,439.39 applied to the second

lease which was as a result of the 16% Value Added Tax that was

charged to the settlement capital of ZMW252,746.20 on the first

lease.

S. The respondent sought guidance from the Zambia Revenue

Authority and he was advised that the settlement capital balance

on a finance lease account does not constitute a supply for VAT

purposes. The Zambia Revenue Authority further guided that the

appellant would have to refund the VAT to the respondent. It is

averred that from November 2016 to October, 2017, the appellant

issued instructions to the respondent's employer at the time to

effect deductions from the respondent's salary and the sum of

ZMW24,158.79 was debited from the respondent's account for the

first lease. The respondent averred that subsequent to the

accident, he gained ZMW26,846.60. from the insurance payout

which was not credited to him and that the total amount for the

insurance gain and the erroneous payroll deduction was

ZMW5 1,005.39. In his witness statement, the respondent's

evidence was a repetition of what was stated in the statement of

claim.
 -J5-

6. The respondent filed a supplementary witness statement in which

he stated that the Bank of Zambia lending rate was 15.5% in 2016

and that it was reduced to 10.25% in 2017. He further averred

that a Zambia Revenue Authority leaflet indicates that termination

of lease by accident does not constitute supply of service for VAT

purposes.

7. The appellant filed a defence and counterclaim in which it averred

that the accident did not terminate the lease which continued

until the facility was fully settled by the respondent or the

insurance company. It was further averred that the second lease

was not fixed at ZMW12,818.51 per month but was dependent on

the Bank of Zambia policy rate and consisted of a VAT component

charged at 16% of the capital portion of the monthly instalment.

The appellant stated that the refund of the ZMW40,439.39 was

credited as capital reduction applied to the respondent's second

lease and not as capital increase.

8. The appellant stated that the settlement capital balance on a

finance lease is chargeable of VAT and that the VAT collected from

the respondent would be remitted to Zambia Revenue Authority

by the appellant. The appellant averred that the respondent was

 -J6-

paid the sum of ZWMW40,439.39 on the understanding that

Zambia Revenue Authority would refund the sum earlier remitted

as VAT charges on finance lease capital settlement but the

Authority did not refund the same. The appellant claimed the sum

of ZMW40,439.39 as money that was wrongly paid to the

respondent as a refund of VAT charged on the first finance lease

capital settlement with interest and costs.

9 At the hearing of the matter, the appellant's witness Horis Ngandu

Mainza, the head of the vehicle and asset finance section at the

appellant gave evidence to the effect that it was an express term

of the second finance lease that monthly instalments would be

subject to fluctuations due to the Bank of Zambia policy rate in

terms of interest as well as VAT chargeable on the second lease.

10. The witness stated that he explained to the respondent how

settlement capital is derived and that adjustment in instalment

payments was due to an increase in the Bank of Zambia policy

rate which affected interest. It was the testimony of the witness

that the bank paid the sum of ZMW40,439.39 to the second lease

as reduction in capital. According to the witness, the customer

paying back a lease facility is subject to VAT charges together with

monthly deductions as well as interest on the facility.

 -J7-

11. The respondent filed a reply and defence to counterclaim and

averred that after the accident what was outstanding was a loan

obligation and not a lease. He averred that VAT is only chargeable

on the capital component of the periodic lease payment of the lease

finance. He stated that the appellant did not reimburse any

money and that the appellant remitted money to Zambia Revenue

Authority due to lack of understanding of VAT regulations.

CONSIDERATION OF THE MATTER BY THE LOWER COURT

12. The lower court analysed the evidence before it and considered the

submissions advanced by the parties. The court was of the view

that the first lease was terminated when the motor vehicle

registration number ALV 3349 was involved in an accident on 101 1,

July, 2015. The court further found that the insurance claim was

paid to the appellant in August, 2015 and that this fully settled

the facility on the amounts that the respondent owed the

appellant.

13. The court found that the Bank of Zambia policy committee

statement of 1611, November, 2016 maintained the policy rate at

15.5% and at its meeting of 20th and 21st February, 2017, the

policy committee reduced the rate to 14%. The court was of the

view that the increase in the respondent's monthly instalments

 -J8-

was not as a result of the change in the policy rate and found that

the increase in the rental amount of the second lease was as a

result of the VAT that was applied to the settlement capital of the

first lease.

14. The court was of the view that the respondent was entitled to the

insurance gain of K26,846.60 which was absorbed due to the

appellant's wrong application of the VAT. It further found that the

respondent proved that the increase in the rental amounts was as

a result of the VAT that was charged on the settlement capital,

which led to the deficit that was added to the second lease and

absorbed the insurance gain. The court ordered the parties to

conduct a reconciliation of the two lease accounts with the aim of

coming to the position that the accounts would have been in if the

appellant had not added VAT to the second lease and refunded the

respondent directly. The court awarded interest on all the monies

due to the respondent at short term deposit rate from the date of

writ to the date of Judgment and thereafter at the current bank

lending rate until date of full payment.

15. The court awarded damages to the respondent for breach of

contract because the appellant charged VAT on settlement capital

of the first lease and added the deficit to the second lease. The
 -J9-

said damages were to be assessed by the Registrar. Regarding the

claim for mental anguish, the court was of the view that the

respondent had not provided any evidence of mental anguish and

accordingly dismissed it. On the claim for aggravated damages,

the court was of the view that no evidence was adduced to disclose

any aggravating circumstances and the claim was dismissed.

16. On the claim for general damages, the court found that the

appellant's actions led to the respondent suffering general

damages and awarded the claims to be assessed by the registrar.

The court dismissed the respondent's claim for loss of business

because it was not specifically outlined in his pleadings and no

evidence was led to show the exact loss that he suffered. The court

dismissed the appellant's counterclaim as it was of the view that

the appellant should not have paid the entire VAT amount for the

lease to the Zambia Revenue Authority at once. The court found

that the appellant had failed to prove its counterclaim and it was

accordingly dismissed.

GROUNDS OF APPEAL AND THE SUBMISSIONS OF THE PARTIES

17. It is against the above Judgment that the appellant has now

appealed to this court advancing four grounds of appeal, namely

that-
 -J'o-

1. The lower court erred in law and fact by holding that VAT was not
chargeable on the settlement capital of the Finance Lease because
there was no option of goods on lease.
2. The lower court erred in law and fact by refusing the defendant's
plea that VAT had already been refunded to the respondent.
3. The lower court erred in law and fact by awarding the respondent
damages for breach of contract and general damages.
4. The lower court erred in law and fact by holding that VAT cannot
be recovered from the respondent thereby dismissing the counter-
claim.

THE APPELLANT' ARGUMENTS

In support of the above grounds of appeal, the learned Counsel for

the appellant filed written heads of argument. When the matter

came up before us for hearing, Counsel submitted that he would

rely on the heads of arguments filed.

18. The gist of Counsel's submissions on the first and fourth grounds

of appeal was that the appeal raises a novel point of law, whether

VAT is chargeable on the settlement capital of a finance lease

agreement. According to Counsel, the respondent's argument was

that the capital settlement (the sum payable after destruction of

goods) is not taxable because when the vehicle is destroyed, there

is no provision of a service. However, the appellant contended that

a finance lease is a supply of a service within the meaning of

 411-

section 2 of the VAT Act and that every transaction or payment

attracts VAT.

19. According to Counsel, the appeal raises the question whether or

not VAT is applicable to a finance lease agreement and further

whether settlement capital attracts VAT. Counsel submitted that

the lower court misdirected itself when it took the view that the

lease is provided monthly. The lower court found that-

"Once the vehicle is involved in a road accident, there

was no provision of any goods on a lease. The provision
of the goods on lease ended no VAT is chargeable in
accordance with section 7 above."

20. The court was referred to section 7 of the Value Added Tax Act

which provides that-

(1) "For purposes of this Act, any supply of goods or

services made by a taxable supplier in the course of
furtherance of a business, that takes place in Zambia
on or after the tax commencement day, other than an
exempt supply, is a taxable supply."

According to Counsel, section 2 of the aforementioned Act defines

what constitutes a "supply of a service for VAT purposes" as

(a) The provision of goods on lease, hire or loan;

(b) A treatment of goods;
(c) Any other activity which the Minister, by regulation declares
to be supply of a service for purposes of this Act.
 -J12-

21. It was submitted that the Value Added Tax Act provides that VAT

is applicable to finance lease agreements and that all payments

under a finance lease agreement attract VAT. It was contended

that since the settlement capital is a payment under a finance

lease agreement, it ought to attract VAT. Counsel argued that the

lower court misdirected itself when it found that VAT was not

applicable on the settlement capital and misapplied the provisions

of the VAT Act regarding the application of VAT on financial leases.

22. It was argued that goods are provided on lease at the time of

execution of the agreement and not monthly. Counsel further

submitted that an agreement does not change its character once

the goods are destroyed and that the finance lease remains the

same whether goods are destroyed or not. According to Counsel,

the lower court ought to have given effect to the agreement as

intended by the parties.

23. Counsel contended that the lower court erred when it dismissed

the appellant's counter-claim on the grounds that VAT cannot be

recovered because it is not chargeable on settlement capital. It

was submitted that grounds one and four have merit and that they

ought to succeed.
 -J13-

24. Coming to the second ground of appeal, Counsel asserted that the

unchallenged evidence led by the appellant before the lower court

is that when the appellant received the letter from Zambia

Revenue Authority (ZRA), it paid the sum of K40,349.39 which

was charged as VAT to the respondent's lease as VAT refund. In

Counsel's opinion, the sum of K40,349.39 was actually refunded

to the respondent as a result of which he obtained a benefit as he

paid less than he would have actually paid under the second lease

facility.

25. According to Counsel, there is a nexus between the first and

second lease and that the appellant added the VAT refund of

K40,349.39 to the second lease which was not a separate and

distinct agreement from the first lease. Counsel contended that

the lower court would not have ordered a reconciliation of the two

lease accounts if there was no link between them. It was

submitted that to award the respondent a sum that has already

been refunded is unjust enrichment. To reinforce his submissions,

Counsel referred to the case of Gemstar Holdings Limited vs Afgri

Corporations Limited' in which the Supreme Court held that -

"It is clear that any civilized system of law is bound to

provide remedies for cases of what has been called unjust
enrichment or unjust benefit, that is to prevent a man
 -J14-

from retaining the money of, or some benefit derived

from, another which it is against conscience he should
keep."

26. Counsel submitted that the respondent is not entitled to any of

the reliefs because the insurance gain was encompassed in the

K40,349.39 that was paid to the second lease by the appellant. It

was submitted that for the foregoing reasons, ground two has

merit and ought to succeed.

27. As for the third ground of appeal, Counsel faulted the learned trial

Judge for not following the laid down principles for awarding

damages. He relied on the case of Livingstone vs Rawyards Coal

Company2 where the court held that-

"I do not think that there is any difference of opinion as

to its being a general rule that, where any injury is to be
compensated by damages, in setting the sum of money to
be given by reparation of damages, you should be nearly
as possible get that sum of money which will put the
party who has been injured or who has suffered, in the
same position he would have been if he had not sustained
the wrong for which he Is now getting compensation or
reparation."

28. Counsel submitted that the lower court unjustly enriched the

respondent by awarding damages for breach of contract and

general damages in addition to an award for payment of the sum

 -j15-

of K40,349.39. According to Counsel, the lower court contradicted

itself when it awarded damages for breach of contract having

found that the contract was terminated before the alleged breach

occurred.

29. It was argued that damages are only awarded when the wrong

complained of is actionable and that no particulars of damage

were pleaded nor was evidence led regarding the said damages.

Counsel contended that the lower court erred when its awarded

damages as the wrong complained of was not actionable. He

prayed that the appeal be allowed and that the lower court's

Judgment be set aside with costs.

RESPONDENT'S ARGUMENTS IN OPPOSITION

30. In response to the grounds of appeal and the appellant's heads of

argument, the learned counsel for the respondent Mr Sianondo

filed written heads of argument which he relied upon. The crux of

Counsel's submissions is that the issues in this appeal revolved

around the question whether the motor vehicle accident

terminated the lease and whether VAT is chargeable on settlement

capital of a finance lease.

31. Responding to grounds one and four, Counsel submitted that the

business transaction between the appellant and the respondent

 -J16-

was the provision of a good on lease and was a supply of a service.

According to Counsel, capital settlement represents the future

lease services which are yet to be provided and that VAT is only

chargeable on the capital portion of the monthly lease payment.

32. According to Counsel, since there were no corresponding services

or goods that were provided because of the accident, the loan or

financial obligation is exempt from VAT purposes as prescribed in

paragraph 7(e) of the schedule to the Value Added Tax Exemption

Order 2014, which is Statutory Instrument Number 68 of 2014.

The said Statutory Instrument provides as follows:

(e) The provision of credit and the interest component offinance

leases, excluding the -

(i) Principal and other finance charges on finance leases

and;
(ii) Principal, interest and other financial charges on
granting leases.

It was submitted that the capital settlement is a provision of credit

that does not constitute a taxable supply for VAT purposes, whose

payment does not attract VAT.

33. Counsel contended that the respondent was paying for the

provision of goods on lease on a monthly basis and that this

attracted VAT. He argued that after the accident, there was no

 -J17-

service that was provided by the appellant because the motor

vehicle was no longer in existence as it was destroyed.

34. According to Counsel, the issue is whether VAT is payable on

capital settlement when the good through which a service was

rendered is no longer in existence. It was submitted that the lower

court was on firm ground when it held that capital settlement was

neither a supply of goods or services by the appellant as it

represented future services which were not yet provided by the

appellant.

35. Counsel further argued that capital settlement cannot attract VAT

in line with sections 2, 7 and 13 of the VAT Act and contended

that if the goods are damaged, there is no service provided and no

VAT was applicable on the capital settlement as it did not

constitute a supply for VAT purposes. In Counsel's opinion, what

remained was a financial obligation in the form of capital

settlement which is payable by the insurance company.

36. It was further argued that the lower court was on firm ground

when it dismissed the appellant's counter claim because capital

settlement is not a supply of a service under sections 2 and 7 of

the VAT Act. It was submitted that section 13 of the VAT Act

provides for when VAT is due on the provision of services and that
 -J18-

the Zambia Revenue Authority gave guidance that capital

settlement is not a supply of service for VAT purposes. It was

further submitted that the lease was paid for on a monthly basis

as the instalments were monthly.

37. According to Counsel, when the motor vehicle was damaged due

to the accident, no VAT was applicable on the capital settlement

as it did not constitute a supply for VAT purposes. Counsel

submitted that there was only a financial obligation in the form of

capital settlement which was paid by the insurance company.

Counsel contended that the lower court was on firm ground when

it dismissed the counterclaim because capital settlement is not a

supply of a service under sections 2 and 7 of the Value Added Tax

Act. It was submitted that grounds one and four lacked merit and

that they be accordingly dismissed.

38. Responding to ground two, Counsel submitted that the appellant

increased the monthly lease payments in an effort to recover the

K40,439.39. It was further submitted that the appellant added

several extra finance charges to the second lease on the

misunderstanding that the insurance company had not settled the

insurance claim for five months. According to Counsel, the

appellant misapplied the monthly repayments to the first lease

 -J19-

due to the misunderstanding that the insurance company did not

settle the claim for five months. It was submitted that the

evidence on record shows that the insurance company made the

payment on 13th August, 2015, a month after the accident which

occured on 10th July, 2015.

39. Counsel submitted that the appellant imposed the outstanding

VAT when no supply was given and further increased the monthly

instalment when there was no change in the Bank of Zambia

policy rate. The court was referred to the case of Chrismar Hotel

Limited vs Stanbic Bank Zambia Limited 3, in which the Supreme

Court stated that-

"It is incumbent upon the banker when challenged to

explain why it has taken a certain course of action in
regard to a customer's account without the customer's
concurrence to justify its action by pointing to a legally
sanctioned reason empowering it to do so."

Counsel contended that the first and second lease were two

different contracts and should have been treated as such. It was

argued that the court was in order to order that a reconciliation of

the respondent's accounts be done to determine the actual

amount of money on each account and ascertain the outstanding

 -J20-

amount on the second lease. Counsel submitted that there is no

case of unjust enrichment on the part of the respondent.

40. Responding to ground three it was submitted that the court found

that the appellant did not handle the two accounts independently

and further misrepresented the facts relating to the settlement of

capital on the first lease. According to Counsel, the resultant

finance charges on the second lease account was due the

appellant's breach and lack of due care, resulting in the increased

monthly payments and interest charges which amounted to a

breach of contract. Counsel referred to the case of Finance Bank

Zambia Limited and other vs Simataa Simataa4, where the court

stated that-

"A breach of contact usually, but not always causes a

loss. In either cases, there is a right of action against
the contract breaker."

41. Counsel argued that the issue is what the consequence of the

breach was. It was argued that the infringement by the appellant

affects both leases and that the lower court was on firm ground

when it awarded the remedies. We were urged to dismiss the

appeal in its entirety for lack of merit.

 -J21-

APPELLANT'S ARGUMENTS IN REPLY

42. The appellant filed heads of argument in reply on 18th August,

2020. Responding to the respondent's arguments on grounds one

and four, it was submitted that as long as there is money due

under a lease, it ought to attract VAT. Counsel argued that what

constitutes supply of a service under a finance lease is the supply

or provision of goods on lease. According to Counsel, the service

is the lease and that VAT ought to be charged for any payment

under the lease. It was contended that destruction of goods does

not negate the fact that goods were provided on lease. It was

further argued that when goods are destroyed, the principle

becomes payable immediately and is paid at once, which is

referred to as the settlement capital. Counsel submitted that it is

the outstanding payment for the service provided to the customer.

43. According to Counsel, the service was provided when the lease was

actuated by making the goods available to the respondent and that

at the time of the accident, the service would have already been

provided, thus making the lessee obligated to pay the settlement

capital. Counsel maintained that the capital settlement of a

finance lease agreement is not exempted from VAT. It was argued

 -J22-

that section 13(2) of the Value Added Tax Act deals with supply of

services in relation to goods provided on lease.

44. On ground two, the appellant's Counsel submitted that there is a

link between the first and the second leases which is that the VAT

from the first lease was applied to the second lease. The appellant

later paid the sum of K40,439 to the second lease. Responding to

issues raised under ground three, Counsel submitted that the

award of damages was not justified because the first lease

agreement was already terminated at the time VAT was charged.

Counsel submitted that the award of damages for breach of

contract as well as general damages was unjustified and

contended that the respondent's arguments are devoid of merit.

He prayed that the appeal succeeds, with costs to the appellant.

DECISION OF THIS COURT

45. In determining this appeal, we are of the view that grounds one

and four question findings of fact relating to the interpretation

made by the learned High Court Judge of the vehicle and asset

finance Interim agreement between the appellant and the

respondent. The said grounds question whether VAT is chargeable

on settlement capital and whether the respondent was under an

obligation to pay VAT on the settlement capital for the vehicle

 -J23-

which was damaged under the first lease. We however note that

the lower court and the parties did not refer to the vehicle and

asset finance interim agreement. A perusal of the interpretation

clause of the agreement reveals that-

Clause 1. 1.1 defines disbursements as-

"All and every amount disbursed or to be disbursed by

the Bank or set aside by the Bank on beha lf of or for the
direct or indirect benefit of the customer in connection
with or arising out of the procurement of the Goods, and
shall include but shall not be limited to the stated sum,
customs and excise duties, fiscal and other charges, VAT
and customs duty, local and foreign bank charges. .

46. Further clause 11.3 of the agreement stipulates that if the goods

are damaged or destroyed, the Bank shall be entitled to cancel the

interim agreement and claim in terms of clause 12.2 and 12.3, as

if an event of default would have occurred.

47. A perusal of clause 12.2.1.1. reveals that the Bank will then claim

immediate payment of all disbursements made by the Bank in

terms of this interim agreement plus interest calculated at the

AFCR from the date on which such disbursements were made to

date of the Bank's claim for disbursements, less any interim

payments made by the customer in terms of the interim

agreement.
 -J24-

48. In the Book Taxation in Zambia Law and Practice Mohamed

Mulenga discusses the treatment of VAT on finance and operating

leases. On termination of lease by default, Mulenga states that -

"In the event of default, the lease can be terminated at

the option of the lessor, in which case the lessee returns
the asset that was the subject of the lease to the lessor,
such transfer of asset and any financial loss associated
with such transfer will not constitute a supply for VAT
purposes."

49. The main issue in grounds one and four is whether the lower court

erred when it found that VAT was not chargeable on the settlement

capital of the finance lease. Having considered the interim

agreement between the parties as well as the Value Added Tax Act,

we are of the firm view that the VAT treatment of payments under

a settlement capital relating to the loss that the respondent

suffered subsequent to the motor vehicle accident is not subject

to VAT as there is no supply of goods for consideration.

50. We further form the view that the appellant was entitled to recover

VAT when it provided the motor vehicle on lease to the respondent,

which terminated when the motor vehicle was involved in the

accident. It is not in dispute that the insurance company settled

the amount that was due to the appellant in August, 2015.

 -J25-

Notably, the existence of the lease constituted the supply of a

service as provided for in section 2 of the VAT Act.

51. We accordingly opine that no VAT would accrue on the settlement

capital as the supply of the service under the interim lease

agreement was prematurely terminated. We note that the

appellant erroneously paid VAT on the first lease to the Zambia

Revenue Authority. Notwithstanding that, the respondent is not

liable for the said payment as it was made by the appellant

erroneously. We therefore do not find merit in grounds one and

four of the appeal and they are accordingly dismissed.

52. In the second ground of appeal the appellant has taken issue with

the court's rejection of the appellant's plea that VAT had already

been refunded to the respondent. From the submissions of the

appellant the argument being advanced is that the appellant paid

the sum of K40,439.39 which was charged as VAT to the

respondent's lease as capital reduction. The appellant contends

that the said sum was applied to the respondent's second lease as

VAT refund.

53. The lower court, in rejecting the defence raised by the appellant

stated that the credit was a benefit which the respondent ought to

have received for the first lease. The court went on to find that the
 -J26-

first and second lease were separate agreements which were

supposed to be treated differently. Counsel for the appellant

argued that there is a nexus between the first and second lease as

the court ordered the reconciliation of the two lease accounts. It

was argued that the lower court awarded the respondent a sum

that had already been refunded, which was unjust enrichment.

We have noted that the appellant credited the amount of

K40,439.39 to the respondent's second lease without seeking the

client's approval.

54. We agree with the lower court that the two leases were distinct

and separate from each other. We are of the view that the

appellant erred when it applied the insurance gain to the second

lease as it acted outside the contractual provisions in the finance

agreement and did not adhere to the banker-customer

relationship between the parties. We note that the appellant's

representatives, Chola Kafula in email correspondence with the

respondent stated that the increase in the rental amount for the

second lease was due to the VAT component on the settlement

capital of the first lease. She further stated that when the VAT

component was added to the settlement capital, this raised the

 -J27-

amount owing as there was a deficit which the appellant then

applied to the second lease.

55. In our view, the lower court was on firm ground when it found that

the increase in the rental amount of the second lease was as a

result of the VAT that was applied to the settlement capital of the

first lease. A perusal of the email that Chungu Chanshila, the

appellant's representative sent to the respondent shows that there

was a reversal of the interest accrued to the capital as a result of

the delayed application of the funds to the running lease account.

The record further shows that the appellant issued instructions

for the refund to the respondent's FNB account for the deferential

of the amount deducted from the respondent's payroll against the

amortization schedule. Clearly, the appellant was in breach of its

contract with the respondent.

56. In light of the foregoing, we form the view that the lower court was

on firm ground when it ordered a reconciliation of the two

accounts so as to ascertain the outstanding amount on the second

lease and the amounts that ought to be refunded to the

respondent. Clearly, the appellant was in breach of its contract

with the respondent.

 -J28-

57. Having followed the sequence of events in this case, we agree with

the lower court that the respondent's account should be treated

the way it should have been had the VAT not been applied to the

second lease. We have come to the conclusion that there is no

merit in ground two and we accordingly dismiss it.

58. Coming to the third ground of appeal the appellant argued that

the award of damages for breach of contract and general damages

ought to be set aside because the lower court did not adhere to

the laid down principles for award of damages. The appellant's

argument on this point is that the purpose for an award of

damages is to place the injured party in the position he would have

been had the breach not occurred. We were referred to the case

of Zambia National Building Society vs Ernest Mukwamataba

Nayunda 5, where the Supreme Court held that-

"The essence of damages has always been that the

injured party should be put as far as monetary
compensation can go in about the same position he
would have been had he not been injured. He should not
be prejudiced or be unjustly enriched."

59. Counsel submitted that the court should have awarded the

respondent the sum of K40,349 and that it did not follow the basic

principle for award of damages when it awarded the respondent

 -J29-

the said damages. The respondent's Counsel on the other hand

submitted that the appellant dealt with the transactions relating

to the two different agreements as one without the respondent's

consent. According to the respondent, resultant finance charges

on the second lease were due to the appellant's breach and lack

of due care as evidenced by increased monthly instalments and

interest charges on the second lease. It was the respondent's

Counsel's submission that he was injured and that he ought to be

placed in the position he would have been in had the breach not

occurred,

60. We have considered the arguments advanced by both parties on

this point and the various authorities which we have been referred

to. Damages are awarded for the invasion of rights to tangible

immovable or movable property and are intended to provide

compensation for loss.

61. Paragraph 1174 of Volume 9 of Halsbury's Laws of England, 4th

edition states that -

"In cases of breach of contract, the contract breaker is

responsible for resultant damage which he ought to have
foreseen or contemplated when the contract was made
as being unlikely."
 430-

The injured party under the contract should recover that which

ought to have been due to him as a result of the breach. In the case

of Robinson vs Harman6, it was held that -

the rule of the common law is that where a party

sustains a loss by reason of breach of contract, he is, so
far as money can do it, to be placed in the same situation
with respect to damages as if the contract had been
performed."

62. In the case of Hadley vs .8axenda1e7 , the court of Exchequer held that -

where two parties have made a contract which one

of them has broken the damage which the other party
ought to receive in respect of such breach of contract
should be such as may fairly and reasonably be
considered either as arising naturally."

63. Having already found that the appellant breached its contact with

the respondent in the manner that it handled the two lease accounts

and further effected erroneous deductions to the respondent, we are

of the view that the lower court was on firm ground when it awarded

the respondent damages for breach of contract, to be assessed by

the Registrar. We further opine that the lower court was on firm

ground when it awarded general damages, as these were a

consequence of the appellant's acts.

 .431-

64. The net result is that this appeal fails in its entirety for lack of merit.

Costs are awarded to the respondent i' - court arid in the court

below. The costs are to be agree. ; - d in default of agreement.

J. CHA
COURT OF APPEAL JUDGE

F. M. LENGALENGA P.C.M. NGULUBE

COURT OF APPEAL JUDGE COURT OF APPEAL JUDGE