IN THE COURT OF APPEAL OF ZAMBIA Appeal No.

175/ 2017 &

HOLDEN AT LUSAKA Appeal No. 27/ 2018

(Civil Jurisdiction)

BETWEEN:

FINANCE BANK ZAMB APPELLANT

AND

LAMASAT INTERNATIO RESPONDENT

CORAM : Chisanga JP, Chishimba and Sichinga, JJA

10th April, 2018, 21•t November, 2018 and 7 th March, 2019

For the Appellant : Mr. E. Mwitwa and Mr. A. Mumba of Messrs Mwenye &
Mwitwa Advocates
For the Respondent : Mr. K. Kaunda of Messrs Ellis & Co.

JUDGMENT
CHISHIMBA, JA, delivered the Judgment of the Court.

CASES REFERRED TO:

1. Zega Limited Vs Zambezi Airlines Ltd SCZ Appeal No. 39 of 2014
2. Diamond Insurance Limited Appeal 39/2014
3. Ellis vs Allen (19 14) 1 Ch 104
4. Roger Scolt Miller v Attorney General 1980 ZR 126
5. Water Wells Limited v Wilson Samuel Jackson (1984) ZR 98
6. General Malimba Masheke & Others v Zambia Daily Mail ltd SCZ No-
23/2002
7. Am on v Bobbelt 1889 22 QBD 543
8. Stumore v Campb ell & Co 1892 1 QB 314 p317
9. Warner v Simpson (1959) QB 297
10. Himani Alloys v Tata Steel LTD 2011(3) RCR (Civil) 10
11. Zinka Vs. The Attorney General (1990-1992) Z.R. 73 S.C
12. Elias Mumeno and 43 Others Vs. Esau Phiri and Others CAZ Appeal No.
63 of 2017
13. Hina Furnishing Lusaka Limited Vs. Mwaiseni Properties Limited (1983)
ZR40
14. Christopher Mulenga, Edgar Hamuwele and Zambia National
Commercial Bank Plc (2010) ZR 221 Vol. 1
15. American Cyanamid Company Vs. Ethicon Limited (1975] 1 All ER 504
 -J2-

16. Kanjala Hill Lodge Limited and Another Vs. Stanbic Zambia Limited
Appeal No. 46 of 20 10 (Selected Judgment Number 17 of 2012)
17. Shell & BP Zambia Limited Vs. Conidaris and Others (1975) ZR 174
18. Akapelwa (Sued as Induna Inete) and Others Vs. Nyumbu (Suing as
Chief Chiyengele) S CZ Appeal No. 4 of 2015
19. Ahmed Abad Vs. Turning and Metals Limited (1987) ZR 174
20. Bob Bwembya Luo Vs. Alfred Banda SCZ Appeal No. 52 of 2011 as
authority
21. Hondling Xing Building Company Limited Vs. Zamcapital Enterprises
Limited (2010) ZR 30 Vol. I
22. Zambia Democratic Congress Vs. Attorney General (SCZ Judgment No.
37 of 1999)
23. Attorney General Vs. Law Association of Zambia (2008) Z.R. 21 Vol. 1
(S.C.)
24. Novartis AG Vs. Dexcel-Pharma Ltd (2008) EWCH 1266 (Pat)
25. Fina Bank Limited Vs. Spare & Industries Limited Civil Appeal No. 51 of
2000
26. Edward Jack Shamwana Vs. Levy Mwanawasa (1994) S. J. 93
27. Smithkline Beech am Plc Vs. Generic (UK) Limited 2001
28. Evans Marshall & Company Vs. Bertola S.A. (1973) 1 WLR 349
29. Lyons & Sons Vs. Wilkins (1986) 1 Ch. 811
30. National Commercial Bank Jamaica Ltd Vs. Olint Corp Ltd (Jamaica)
(2009) lWLR
31. Development Bank of Zambia v Chani Enterprises SCZ Appeal No. 99 of
2001
32. Zambia National commercial Bank PLC, Edgar Hammuwele &
Christopher Mulenga {As joint Receiver /Manager of Courtyard Hotel
Limited - in Receivership vs. Courtyard Hotel Limited) SCZAppeal No.
141 of 2015

LEGISLATION AND OTHER WORKS REFERRED TO:

1. R. E. Megarry and P. V. Baker Snell's Principles of equity 24th Edition
2. Halsbury's Laws of England Volume 16 (2) 4 th Edition
3. Jixi Zhang, Journal of Politics and Law - Fair Trial Rights in ICCPR
4. The Lands and Deeds Registry Act, Chapter 185 of the Laws of Zambia
5. The High Court Rules, Chapter 27 of the Laws of Zambia
6. Steven Gee Q.C., Commercial Injunctions (2016) 6 th Edition
7. G. Lightman & G. Moss, The Law of Receivers and Companies. 6 th
Edition. London: Sweet & Maxwell, 1986.

Appeal numbers 175/2017 and 27 /2018 arising from cause

number 2017 / HP/0150 were consolidated by the court upon

application. Therefore they will be determined accordingly. The

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consolidated appeal arises from two separate decisions delivered

by the court below, refusing to enter judgment on admission and

granting the respondent an interim injunction pending

determination of the main matter.

The appellant and the respondent were 1n a

banker/ customer relationship. The respondent obtained several

loan facilities from Finance Bank. The facility relevant to the

proceedings is the term loan facility obtained to consolidate the

existing facilities into a single loan of US$10,000,000. The term

loan facility was also meant to settle the balance of the sum of

US$ 3 ,408,624.65 . The tenor was sixty months equating to 60

monthly installments.

During the course of the banking relationship, the appellant

Bank was acquired by Atlas Mara Group on 30 th June, 2016. On

24th January, 2 0 17, a letter of demand for the full settlement of

the sum of US$ 12 .2million was made to the respondent. The

respondent was t o pay, the said sum owed within 14 days, failure

to which a Receiver and Manager would be appointed to ensure

recovery of the d ebt.

The respon dent then commenced an action against the

appellant. In its amended writ of summons, the respondent

 -J4-

sought an injunction to restrain the bank from prematurely

appointing a Receiver to manage its affairs. Further, the

respondent sought an order to vary or restructure the settlement

terms of the term loan facility and to direct the applicant to settle

the overdraft facility arrears in installments. In addition,

damages were sought. The appellant settled a defence and

counterclaim. Upon the respondent filing a defence to the

counterclaim, the appellant applied for entry of judgment on

admission.

In respect of the application for judgment on admission, the

respondent, in its supporting affidavit, deposed that the appellant

had admitted owing the counterclaimed sum of

US$12,229,065.6 3. That the defence to the counterclaim as well

as the amended writ of summons by the respondent did not

dispute the appellant's claims in the counterclaim. Further, that

the respondent admitted pledging a number of properties as

security for the Loan. In addition, that the respondent did not

dispute being in default of the Term Loan Agreement, its

indebtedness and the arrears due.

In opposing the application, the respondent stated that it

had not admitted the amounts alleged to be due and outstanding.

 -JS-

The counterclaim s um included penalty and 10% daily compound

interest. Therefore , it was undesirable to enforce the mortgage by

way of foreclosure . That in any event, the estimated value of the

mortgaged properties was US$ 32,400,000 compared to the

claimed foreclosure sum of US$ 12,229,065.63. The gist of the

opposition being that entry of judgment on admission would

render the respondent's claims academic.

The appellant in its affidavit in Reply reiterated that the

respondent had admitted liability and that the value of the

security properties for the term loan facility was not a defence to

the counterclaim nor was it a bar to entry of judgment on

admission. The appellant refuted that interest on the account

was in contention, and stated that compound interest was agreed

upon.

The learned Judge in the court below held that granting the

judgment on admission at that stage would fly in the teeth of his

ruling dated 13th July 2017 (injunction) which held that there

were issues rais ed that could only be determined at trial. The

Judge further stated that;

"granting t he sought remedy and relief to the Defendant at this

stage will tantamount to terminating the plaintiffs action
without bei ng given an opportunity to be heard as dictated by
one of the ndes of natural justice audi alteram patem..."
 -J6-

The court below was of the view that the amounts in issue

were not quantified and ought to be investigated at trial to

determine the amount for which entry of judgment ought to be

entered. The court dismissed the application for b eing devoid of

merit.

Being dissatisfied with the refusal to enter judgment on

admission, the app ellant raised five grounds of appeal as follows;

(1) The court erred in law and fact when it declined to enter
judgment on admission against the respondents
notwithsta nding that the pleadings and the evidence on
record s how that the respondents have admitted the
appellant's counterclaim.
(2) The court below erred in law and in fact when it held at page R7
of the Ruling that granting the judgment on admission will
fly in the teeth of the court's ruling of 13th July 2017, when
in fact t he said ruling dealt with separate issues and was
restricted to the respondent's claim.
(3) The court be low erred in law and fact when it held at R7 of the
Ruling t hat grating the judgment on admission to the
appellant will be tantamount to terminating the respondents'
action w ithout being given an opportunity to be heard, when
in fact and in law, a counter-claim is a cross action which
stands independent of the respondents' claim.
(4) The court be low erred in law and in fact when it held at page RB
of the Ruling that the fact that the appellant was
contemplating assessment is an admission that the amount
claimed is not quantified when in fact the appellant's
counterc laim is specific on the amount and interest claimed.
 -J7-

(SJ In the alternative, the court below erred in law and in fact when
it declined to enter judgment on admission against the
respondents notwithstanding the fact that the pleadings and
evidence on record show that the respondents do not dispute
their liability to the appellant.

Ground one and five will be addressed together as the issue

raised is the same. The appellant submits that the High Court is

reposed with jurisdiction to enter judgment on admission where

admissions of facts or part of a case have been made by a party,

pursuant to Order 21 Rule of the High Court Rules as well as

Order 27 Rule 3 o f the Supreme Court Rules.

It was contended that an admission may be express or

implied and must be clear. The cases of Zega Limited Vs. Zambezi

Airlines Ltd t11 and Diamond insurance limited 121 were cited as well as

the English decision in Ellis Vs. Allen <31 on admissions made by

letter or otherwise. The appellant contended that the court below

did not take into account the pleading and evidence on record

that showed admitted liability by the respondent. Reference was

made to the defence to the counterclaim filed by Lamasat

International and the fact that the counter-claim contained

admissions by the respondent. Therefore, the appellant was and

is entitled to judgment on admission.

 -J8-
\.,

In the alterna tive, Counsel submitted that the issue for

assessment should have been referred to the learned Deputy

Registrar. He opined that Judgment can be entered as regards

liability and thereafter the issue of quantum i.e assessment of

damages left to the learned Deputy Registrar. As authority, the

cases of Roger Scolt Miller v Attorney General 141; Water Wells Limited

v Wilson Samuel J a ckson 151 and General Malimba Masheke & Others v

Zambia Daily Mail ltdf6J were cited.

Ground two assails the holding by the court to the effect

that granting judgment on admission will fly in the teeth of the

court's earlier ruling of 13 th July 2017. The ruling of 13 th July

2017 granted the respondent an injunction restraining the

appellant from appointing a Receiver /Manager to realize the debt

owed. The gist of the argument in this ground being that the

earlier ruling dealt with the injunction restraining appointment of

Receiver /Manager and that entering judgment on admission

cannot be said t o fly in the teeth of the ruling

Under ground 3 , in respect of the holding that entry of

judgment on adm ission would terminate the respondent's action,

Counsel for the appellant submits that a counter-claim is an

independent action, a cross action against the plaintiff by a

defendant. It stood independent of the respondent's action. As

 -J9-

authority, Order 15 Rule 2 of the Supreme Court Rules and

the cases of Amon v Bobbelt f7J and Stumore v Campbell & Co f8J were

cited. Counsel contended that the court below erred in fact by

holding that granting the judgment on admission would be

tantamount to term inating the respondent's action without an

opportunity being given to be heard when the counterclaim is an

independent action.

In ground four, the appellant submits that the counter

claim amount is s p ecific in the sum of US$ 12,229,065.63 plus

compound interest at 10% and not unquantified as stated by the

court below. The issue of assessment of the amount owed had

nothing to do with the entry of judgment on admission on the

specific amount admitted as owing to the appellant. Therefore

the court below erred by declining to enter judgment on

admission. We were urged to set aside the ruling of the court

below.

The respondent, in the heads of argument, submitted that

there was no admission of the counterclaimed sum of

US$12,229,065.63 in the pleadings as alleged by the appellant.

The amount in issue was disputed as it contained charges or

penalty interest, h ence the request for bank statements. The

 -JlO-

issue of p enal charges was a matter to be resolved at trial.

Reference was made to Regulation 10 of S.1 No. 179 of 1995.

It was further submitted that there was no clear admission

which could be said to be unconditional and absolute. The gist of

the above argument being that h aving traversed seriatim each

and every argument in the counter-claim, t h ere was no

admission. The case of Warner v S impson r91 was cited as

authority. It was contended that an admission m u st be

unambiguous and absolute for it to be acted upon. As authority,

the case of Himani Alloys v Tata Steel LTD r1o1 was cited. Reference

was also made to the provisions of Order 27 Rule 3 of the High

Court Rules and Order 27/3/4 of the Rules of the Supreme

Court.

In response to grounds two and three, it was submitted that

the court below was on firm ground in holding that granting the

judgment on admission would essentially terminate th e entire

action without a ccording the respondent an opportunity to be

h eard on its claim. The ruling on the injunction dated 13 th July

20 17 was adverted to in submitting that the court below rightly

recognized that there were serious issues to be determined at

 -Jll-

trial, hence the dismissal of the application for judgment on

admission.

The respondent contended that the issues claimed in the

writ and counterclaim were not separate or independent of each

other and cannot be determined separately. By way of analogy

the cases of Zega Limited v Zambezi Airlines Limitedf1 J and Diamond

Insurance Limitedf2J were cited, which dealt with a claim for

negligence, liability and entry of judgment on admission. It was

argued that it wou ld be unjust to enter judgment on admission

without determin ing all the issues raised, particularly the

negligence claim where the sum due can only be ascertained after

assessment.

The respondent further argued that entering judgment on

admission would contravene its right to be heard, 1s

unconstitutional, and in breach of the international convention

on Civil and Political Rights. Reliance was placed on Article 118

(a) of the constitution on the right to a fair hearing which is

replicated by Article 14 of the United Nations Convention on

civil and political rights. The respondent made reference to the

Article by Jixi Zhang, the journal of politics and law on

 -J12-

Article 14. On the issue of the right to be heard, the case of

Z i nka v Attorney General (11J was cited.

In a nutshell, the respondent contends that the statutory

provisions on entry of judgment on admission cannot override

constitutional provisions, even in the face of a clear admission.

The entry of ju dgment on admission wou ld render the

respondent's claims academic in the court below. The

respondent went on to cite a number of cases in which the

Supreme Court frowned upon academic orders. It was submitted

that the court below properly exercised its discretion by declining

to enter judgmen t on admission and that the appeal be dismissed

with costs.

We have considered the arguments, authorities cited and

the submissions by the learned Counsel for the parties. It is trite

that the cou rt h as discretionary power to enter judgment on

admission under Order 27 Rule of the High Court Rules. This

power is exercised in only plain cases where the admission is

clear and unequivocal. There is a plethora of decisions on the

admissions and entry of judgment. An admission has to be plain

and obvious, on the face of it without requiring a magnifying

glass to ascertain its meaning. Admissions may be by pleadings

 -113-

or otherwise. The crux of the first part of this appeal is whether

in the circumstances the learned judge erred by refusing to enter

judgment on admis sion.

The requirements to be satisfied before the court can

pronounce or ent er a judgment on admission are that the

admissions have been made in either the pleadings or otherwise,

and must be clear and unequivocal. We have perused the

pleading by the parties on record. Upon the respondent filing a

claim into court, a defence and counterclaim was entered by the

appellant seeking payment of the sum of US$ 12,229,065.63. A

defence to counter-claim was filed which was the basis of the

application for entry of judgment on admission. The respondent

in its defence to the counter claim in paragraph six averred that

the demand by the appellant was premature and it had not failed

to settle its indebtedness with the bank "but had merely applied

to have the settlement terms of the facility restructured".

Further, tha t the proposals made were capable of liquidating

the debt of US$ 12,229,065.63 and that the value of the pledged

properties exceeded by far the said debt by far. In paragraph 8,

the respondent reiterated that it had not failed to settle the debt

to the bank as it is a viable going concern with an active income

•
-J14-

generating immovable asset portfolio valued at approximately

US$ 165,000,000.0 0.

We are therefore of the view that Lamasat had clearly

admitted the indebtedness to the appellant in the claimed sum of

US$ 12,229,065.63 . The default was admitted by the respondent

who averred that it admits the contents of paragraph 1- 7 of the

counter-claim. The contents of the admitted paragraphs being

the obtaining of the term loan facility in the sum of US$

13,408,624.65 whose purpose was to consolidate the existing

credit facilities into a single loan of US$ 10,000,000 and to settle

an outstanding b alance of US$ 3,408,624.65. Compound interest

of 10% per annum would accrue. Paragraph 15 of the counter

claim averred that the respondent had defaulted on its

contractual obliga tions and made undertakings to deposit US$

3,000,000 to amortise its debt to the bank. Paragraph 7 averred

that the respondent had acknowledged its indebtedness and

pledged to liquidate outstanding amounts due by December

2016.

We are of the view that the admission in the pleadings

having been clear, unambiguous and unequivocal, the court

below erred by declining to enter judgment on admission. The

." • -JlS-

respondent, aside from ad1nitting the counterclaim in respect of

the claimed sum, did not dispute liability to the appellant.

The issue in ground two is whether the grant of the

judgment on admission would have flown in the teeth of the

ruling of 13th July 2017 which granted an interim injunction

restraining the app ointment of Receiver/Manager. The ruling of

13th July 201 7, which we will revert to in determining the appeal

against the order of injunction, granted an interim injunction to

the respondent, p ending determination of its claim for an order to

vary or restructure the settlement terms of the term loan facility

and to pay the overdraft facility in instalments.

We hold the view that entering judgment on admission

against the respon dent would not have flown in the teeth of the

ruling granting an injunction. The lower court therefore erred by

refusing to enter judgment on admission. A court cannot refuse

to grant judgment on admission in the face of clear admissions.

Ground three assails the holding by the lower court to the

effect that enterin g judgment on admission would be tantamount

to terminating the respondent's action without being given an

opportunity to be heard . It is trite that a judgment on admission

can be entered b efore determining whether the admitted sum can

 -J16-

be liquidated in ins talments; analogous to a claim to restructure

the payment of the loan. The entry of judgment on admission has

no bearing on other claims. We find no merit in ground three.

In ground fou r, the issue is whether the amount claimed by

the appellant is n ot quantified. The court below stated that the

fact that the appellant was contemplating assessment 1s an

admission that the claimed sum is not quantified.

We are of the view that the court below erred. Perusal of the

counter-claim on r ecord clearly shows the amount claimed by the

bank, i.e the sum of US$ 12,229,065.63 plus contractual interest

at 10% compounded daily from the 24 th January 2017 until full

payment. There was nothing unquantified about the claim of

12.2 million dollars to require reference to assessment. At the

most only the in terest could be assessed. In any event, the

agreed compound interest is known and is easily quantified.

In conclusion, we hold the view that, there was clear

admission of liability in the sum of US$ 12,229,065.63 which the

court below ought to have entered judgment accordingly.

We accordin gly set aside the ruling of the court declining to

enter judgment on admission and hereby enter judgment on

admission in the admitted sum of US$ 12,229,065.63 with

 -J17-

interest as contractually agreed at 10% compounded from 24 th

January 2017 until date hereof, and thereafter at the current

bank lending rate.

We now turn to consider the appeal against the order of

injunction against the appellant. The respondent in the affidavit

filed in support of the application for an interim injunction,

deposed that the demand letter by the appellant Bank did not

disclose the nature of the default. The respondent bewailed the

financial constraints it was experiencing and the lack of capacity

to mobilize resour ces within 14 days to satisfy the demand. The

respondent further stated that the appointment of the

Receiver /Manager would be detrimental as it would attract a 'call'

on all other existing facilities with other financial institutions. In

addition, the resp ondent contended that the appointment of a

Receiver /Manager would reduce the reposed confidence of its

suppliers and cu stomers. Consequently, the respondent would

be compelled to wind up the company, resulting in the loss of

employment of over 1,000 of its employees.

According t o the respondent, the loss and damage likely to

be suffered 1n the event of the appointment of a

.. -J18-

Receiver/ Manager would be immense and cannot be atoned for

by any award of damages.

In opposing the application, the appellant stated that the

restructured term loan facility of the sum of US$13 million was

repayable in monthly installments of US$ 213,220.50. The

facility was secured by a Debenture on the fixed and floating

assets of the respondent.

According to the appellant, the respondent defaulted and

continues to default in liquidating the indebtedness. This

culminated into the appellant issuing the respondent a demand

letter. Further, that the respondent is in arrears of eight

installments and has an overdrawn amount in the sum of US$

1.Smillion. The default in payment was and has been

acknowledged by the respondent who has made futile promises to

settle the debt.

The appellant stated that the injunction would give the

respondent an unfair advantage and would prejudice the

appellant. Further, that the respondent would not suffer

irreparable damages if the injunction is not granted which cannot

be atoned for in damages. In any event, the appellant is capable

of paying the damages should any be suffered. As to the balance

 -J19-

of convenience, the appellant deposed that it weighs 1n its'

favour.

The learned Judge in the court below considered the

principles applicable to the grant of injunctions namely; clear

right to relief, irrep arable injury, and balance of convenience and

maintenance of th e status quo. The lower Court found that the

respondent had a clear right to relief which raised serious

questions to be tried. Though the learned Judge held that the

respondent would be adequately compensated in damages, he

was of the view that refusing the grant of the injunction would

terminate the whole matter prematurely without considering the

serious questions raised. Consequently, the Judge granted the

interim injunction to maintain the status quo .

Being dissatisfied with the decision of the court below, the

appellant fronted 4 grounds of appeal namely that;

1. The Court be low erred in law and fact when it decided to grant
the responde nt an interlocutory injunction solely on the ground
that it neede d to maintain the status quo notwithstanding that
the respondent had come to court with tainted hands owing to
its default o·n its obligations to pay back amounts owed by it to
the responde nt.
2. The court be low erred in law and fact when it decided that the
respondent had a clear claim to relief notwithstanding that the
Court had found as a fact, that the respondent had borrowed
>
-J20-

money from the appellant and had defaulted on its repayments

to the appellant.
3. The Court below erred in law and in fact when it decided to
grant the respondent an interlocutory injunction
notwithstanding that the Court acknowledged that the
appellant's contention that damages would be an adequate
remedy had merit.
4. The Court below erred in law and in fact when it decided that
not granting the respondent an interlocutory injunction would
terminate the whole matter prematurely contrary to the
pleadings and c laims filed by the parties which show that the
claim for an inj unction was only one of the several claims in
contention.

The appellant filed into Court heads of argument dated 29 th

December, 2017. It was submitted, under ground 1, that the trial

Court found as a fact that the respondent was indebted to the

appellant and was in default. Further, at the time the letter of

demand was issued, there was an outstanding sum of US$ of 1,

7 67, 771.90 and US$ 1, 597, 409.22 on the overdrawn account.

To date, the respondent has failed to discharge its monthly

installments.

The appellant argued that clearly the respondent was in

default and had com e to equity with tainted hands. We were

referred to the latin maxim 'he who comes to equity must come

with clean hands'. The appellant further referred us to an extract

from Snell's Principles of equity 24th Edition and Halsbury's

 -J21-

Laws of England Volume 16 (2) 4 th Edition at paragraph 560

where the learned authors discussed the above maxim. It was

contended that the respondent did not have a clean past record

when it approach ed the trial Court for an interlocutory

injunction. We were referred to our decision in the case of Elias

Mumeno and 43 Others Vs. Esau Phiri and Others f12J where we stated

that;

"The court below found that since the Plaintiffs were squatters
who did not have the approval of the relevant authorities to be
on the land, they had not come to equity with clean hands, in
our view, the defence of unclean hands will apply where there is
a link between t he applicant's wrongful act and the rights he
seeks to enforce. Inequitable conduct by the applicant is usually
a bar to equitable relief. .. The burden to show that they had no
blemish fell on t he Plaintiffs."

The appellant submits that there is a link between the

maxim or defence of unclean hands and the right to relief. In a

nutshell, the gist of the appellant's arguments is that the

respondent cannot seek an equitable relief having defaulted on

the loan facility. Further, that the lower court having found that

the respondent was in default ought not to have granted the

in terim injunction to the detriment of the appellant's legal and

contractual rights to recover the debt. To persuade us, we were

referred to the High Court cases of Hina Furnishing Lusaka Limited

Vs. Mwaiseni Properties Limited f13J and Christopher Mulenga, Edgar

 -J22-

Hamuwele and Zamb ia National Commercial Bank Plc (141 and the

principle that an injunction being an equitable remedy should

not be sought by a party who is in breach of contract or one

whose hands are tainted.

In arguing ground 2, the appellant submitted that the court

erred when it granted the respondent an interim inju nction

inspite of holding that the respondent had defaulted on the loan

and has not liquidated its indebtedness to the appellant. The

respondent had no clear right to relief. We were referred to the

case of American Cyanamid Company Vs. Ethicon Limited r1 s1 where

Lord Dip lock discussed the principles the court ought to employ

in deciding wheth er or not to grant an injunction.

The appellant reiterated that the respondent had no clear

right to relief. Clause 20 of the term loan facility clearly

stipulated that u p on default, the appellant had a right to demand

for the outstanding sum on the facility if the default is not

remedied within 14 days. We were referred to the Supreme Court

case of Kanjala Hill Lodge Limited and Another Vs. St anbic Zambia

Limited r16J in which the Court stated that in an instance where

parties include a default clause in their agreement, then there is

an indication that the clause ought to be invoked on default. The

 -J23-

appellant argued that in the circumstances it is entitled to invoke

the default clause.

The appellant's further argument is that in any event the

respondent cannot restrain it from exercising its legal right to

appoint a Receiver /Manager in order to recover monies owed.

Our attention was drawn to the decision in the case of

Christopher Mulenga, Edgar Hamuwele and Zambia National

Commercial Bank Plc <14 J where the court refused to grant an

injunction restraining a party from appointing a receiver.

Under ground 3, the appellant argued that where damages

would be an adequate remedy an injunction ought not to be

granted. In support of this proposition we were referred to the

cases of Shell & BP Zambia Limited Vs. Conidaris and Others <17J,

Akapelwa (Sued as Induna Inete) and Others Vs. Nyumbu (Suing as

Chief Chiyengele) <1 8J, Ahmed Abad Vs. Turning and Metals Limited f19J,

Bob Bwembya Luo Vs. Alfred Banda r20 and Handling Xing Xing

Building Company Limited Vs. Zamcapital Enterprises Limited f21J as

authority. The appellant argued that the Amended Writ of

Summons on record clearly indicates that the respondent made

several claims for damages therefore it can be adequately

compensated for in damages. It was submitted that having found

 -J24-

that damages were an adequate remedy the trial Court ought to

have declined to grant the interim injunction.

The appellant, in arguing ground 4 contended that the

claim, for an injunction was just one of the remedies sought from

the court. Therefore refusal to grant the injunction would not

have determined th e whole matter. Further, that had the trial

Court properly directed itself it would have found that the

respondent's claim is mainly a claim for damages.

The respondent filed heads of argument dated 5 th April,

2018. In response to grounds 1 and 4 the respondent submits

that the Court m erely upheld its constitutional right to be heard

on its claims when it confirmed the injunction. Further, that the

appellant's counter claim was commenced after the respondent

had sought the court's indulgence to revise payment plans. In

addition, that the demand notice by the appellant is premature

and irregular.

The respondent contended that had the lower Court

discharged the ex-parte order of injunction, the claims would

have been defeated without it being afforded an opportunity to be

heard contrary to the provisions of the Constitution and the

International Convention on Civil and Political Rights. The

 -J25-

respondent invited us to have regard to Articles 1(1), 1 (3) and

Article 18 (9) with regards to a fair hearing and to the provisions

of the Constitution which bind all institutions and persons in

Zambia. We were fu rther referred to a commentary on Article 14

of the United Nations International Convention on Civil and

Political Rights, b y Ji.xi Zhang in the Journal of Politics and

Law, relating to the right of every individual to have access to the

courts and a claim to justice. To further buttress the importance

of the right to be h eard we were referred to the case of Zinka Vs.

The Attorney Genera l f 11J.

In refuting the argument that the respondent has come to

court with tainted hands, it was contended that the sum

demanded by the appellant has been disputed because it

includes amounts other than the outstanding arrears contrary to

Clause 20 of the Term Sheet. Further, that the respondent has

shown good faith by continuing to make substantial payments on

the facility even after the lower Court granted the ex-parte order

of injunction.

The respon dent argued that an injunction 1s not only an

equitable remedy but is also a statutory remedy. Where statute

law and equity conflict, the former prevails. Therefore, the right
 -J26-

to be heard would still prevail over the principles of equity even in

the face of non-payment by the respondent. In respect of the

authorities cited by the appellant to the effect that an injunction

is an equitable remedy not to be sou ght by a party in breach of

contract or one whose hands are tainted, the respondent

contends that th e cases are not only inapplicable but

distinguishable.

It was submitted that vacating the injunction would render

the respondent's claims in the lower court academic. We were

referred to the ca ses of Zambia Democratic Congress Vs. Attorney

General f22J and Attorney General Vs. Law Association of Zambia f231

where the court disapproved of being engaged in academic

exercises.

The respondent argued that the lower court was on firm

ground when it held that discharging the injunction would

terminate the whole matter prematurely. Further, that for

orderliness and in line with th e constitutional right to a fair

hearing all the claims ought to be determined concurrently.

In response to ground 2, the respondent contended that the

sum demanded by the appellant is disputed owing to the fact

that it contravenes the provisions of Clause 20 of the Term Sheet

 -J27-

which allows the appellant to issue a demand notice with respect

to outstanding arrears only. Therefore the demand notice issued

by the appellant is irregular entitling the respondent to a right to

relief.

According to the respondent, the debenture was preceded by

three mortgage securities valued in the sum of US$32, 400,

000.00. This value is more than the sum claimed in the demand

notice. The respondent went on to argue that the demand notice

was issued in bad faith and is premature as the appellant ought

to have exhausted the mortgage securities before threatening

receivership. Therefore, there are serious issues to be determined

at trial. We were referred to the case of Novartis AG Vs. Dexcel-

Pharma Ltd t24J on the consideration that in assessing whether or

not triable issues exist, the court is not called upon to finally

determine the whole matter.

It was submitted that by threatening receivership the Bank

was in essence attempting to deny the respondent its statutory

right of redemption as provided for under Section 66 (1) of the

Lands and Deeds Registry Act, Chapter 185 of the Laws of

Zambia.
 -J28-

The respondent contended that the counter-claim for

foreclosure and sale are a confirmation that the mortgage

securities ought to have been exhausted before threatening

receivership which is a remedy of last resort. We were referred to

the Kenyan case of Fina Bank Limited Vs. Spare & Industries

Limited r2 s1 where the court discussed the negative repercussions

of a company being placed on receivership, which ought to be

considered before a court may grant an injunction preventing

receivership.

In respect of the cited case of Kanjala Hill Lodge Limited and

Another Vs. Stanbic Zambia Limited r16 it was submitted that it is

distinguishable, the creditors were not at the same time

mortgagees and debenture holders as is the case herein. Further,

that the demand n otice by the appellant was made in bad faith

because Cavmont Bank Limited had already made an

undertaking to pay the outstanding balance in the sum of US$2,

500, 000. 00 as evidenced by a letter appearing at page 265 of the

Record of Appeal. On the 10th of January, 2017, Madison Asset

Management Company also confirmed that it would transfer the

sum ofUS$1, 500, 000.00 on or before 16th January, 2017.

 -J29-

In response to ground 3 the respondent argued that Order

27 Rule 4 of the High Court Rules, Chapter 27 of the Laws of

Zambia empowers the court to grant an inju nction even where

the applicant's claims is for damages. Damages are not a bar to

granting an order of injunction. We were referred to the case of

Edwa rd Jack Sham wana Vs. Levy Mwanawasa f26J where the

Supreme Court stat ed that adequacy of monetary compensation

is nearly always a ground for not granting an injunction. The

respondent contend s that damages would not atone for the loss

to the respondent of the properties whose value (US$200, 000 ,

000.00) is considerably higher than the value at which the

appellant was purchased by Atlas Mara (US$60, 000 , 000.00).

Further, that the respondent's status and loss of opportu nity

cannot be atoned for in damages.

The respondent went on to highlight the nature of

irreparable damages to be suffered in the event of receivership

such as lawsuits by its employees and suppliers of materials as

well as the anticipated termination of loan facilities obtained from

other financial institutions on account of the demand notice.

Equally, that the r espondent's brand and goodwill cannot be

atoned for in damages. We were referred to the cases of

Smithkline Beecham Plc Vs. Generic (UK) Limited f27J, Evans Mars hall
. '
-J30-

& Company Vs. Bertola S.A . f28J, Lyons & Sons Vs. Wilkins f29J and

National Commerci a l Bank Jamaica Ltd Vs. Olint Corp Ltd (Jamaica)

r3 o1 on the issue of whether or not damages would be an adequate

remedy. To furth er buttress the issue of the inadequacy of

damages, the respondent referred us to a passage from the

learned author of Commercial Injunctions (2016) 6 th Edition

on the losses to be taken into account for the purposes of

deciding wheth er d amages would be an adequate remedy for the

claimant.

In conclusion , the respondent submits that the application

of principles of equity depend s on the nature of the claims.

Further, that these claims are also affected by statutory

provisions that relate to the issues before the court. The

respondent argued that on the whole, the balance of convenience

tilts in its favor.

In response, Mr. Mwitwa, in respect of the cited case of Z ega

Limited Vs. Zambezi Airlines limit edf1J submitted that the case is

distinguishable a s it dealt with th e tort of negligen ce, whereas the

issue before us arises from a loan secured by a mortgage.

Learned Counsel went on to contend that the need to

ensure justice is done must be for the benefit of all parties in the
. .. . -J31-

matter and that th e exercise of discretion must be exercised

judiciously. It was submitted that the court's discretion was

exercised wrongly in view of the admission of indebtedness by the

respondents. Reference was made to the Reply and Defence to

Counterclaim at p a ges 267 -273 of volume one of the record,

particularly paragraph seven, where the respondent averred that

it was capable of liqu idating the debt ofUS$12, 229,065.53.

In respect of t he assertion that the entry of judgment on

admission would t erminate the respondent's claims, it was

submitted that the claims are capable of being determined on

their own. We were therefore urged to dismiss the appeal with

costs.

We have considered the appeal, the authorities cited and the

submissions advanced. Grounds 1, 2 , and 3 of the appeal raise

issues namely the applicable principle of law in the grant of

injunctions, and whether the learned judge in the court below

was on firm ground in refusing to grant the injunction. The said

grounds will be dealt with as one. The fourth ground raises the

issue whether the refusal to grant an injunction would have

terminated the whole matter prematurely.

 -J32-
..
The undisputed facts are that the respondent obtained a

term loan facility to consolidate the existing facilities into a single

loan of 10 million dollars and to settle the balance of the loan of

3.4 million dollars. As security for the loan, the legal mortgages

were executed in respect of thr~e properties. The relevant

security being the Debenture created on the fixed and floating

assets of the plaintiff to secure the sum of US$12 ,000,000 and

interest. The appellant then issued a letter of demand for

settlement of the su m owed within 14 days, failure to which a

receiver and manager would be appointed to recover the debt.

The application for an injunction was granted by the court below.

It is trite that an applicant must satisfy the thresholds of

issuance of interlocutory injunctions, that there is a prima facie

case with probability of success, that the applicant will suffer

irreparable injury which would not adequately be compensated

by an award of damages and if the court is in doubt, it will decide

the application on the balance of convenience.

A prima facie case is one which on the material presented a

court properly directing itself will conclude that there exists a

right which has app arently been infringed by the other party. On

the issue of whether there is a clear right to relief, we have looked

I •
•
-J33-

at the writ and claim by the respondent. Lamasat admits

defaulting on its ob ligations in respect of the short term loan.

The consequences of defaulting being the right of Finance Bank

to call in the debt and appoint a Receiver /Manager pursuant to

the Debenture/Floating charges over the assets of Lamasat.

A debenture s ecurity provides for the appointment by the

secured creditor upon any default by the debtors or occurrence of

specified events, of a receiver with powers to carry on the

company's business with the view of reviewing the company or to

the beneficial sale o f the entity as a going concern. We refer to the

learned au th ors of The Law of Receivers and Companies, 6 th

Edition, 1986 at page 10 paragraph 2 -07. In the case of a

floating charge, the creditor has a choice whether to make the

appointment.

In a nutshell, a debenture holder has the right to exercise

its contractual righ t pursuant to the debenture upon clear

default. The respondent having defaulted on the loan facility

agreement, the bank is entitled and empowered under the

debenture to appoin t a Receiver /Manager. We are therefore, on

the above basis, of the view that th e respondent has not shown a

prima facie case with a probability of success. The applicant,

•• ..
-J34-

Lamasat, who sough t the equitable injunctive relief has not come

to court with clean hands, having defaulted on his obligations.

The applicant has a cknowledged being in arrears of the monthly

repayments and is disentitled from seeking the aid of equity.

It is trite that the court will not normally interfere with the

appointment of a receiver under the terms of a debenture holder,

unless it is not for the benefit of the holder or the appointment

was in bad faith. According to Halsbury's Law of England 3 rd

Edition Volume 6 paragraph 699, "a debenture often gives power

to appoint a Receiver and Manager in specified events ... .."

There are a plethora of authorities in which interim

injunctions restraining the appointment of a receiver have been

discharged on th e b asis that the applicant was in default of the

loan obligations. See the cases of Development Bank of Zambia v

Chani Enterprises f31J; and Zambia National commercial Bank PLC,

Edgar Hammuwele & Christopher Mulenga (As Joint Receiver/Manager

of Courtyard Hotel Limited - in Receivership vs. Courtyard Hotel

Limited) f32J. In the la tter case of Zambia National commercial Bank

PLC, Edgar Hamm uwele & Christopher Mulenga (As joint

Receiver/Manager of Courtyard Hotel Limited - in Receivership vs.

Courtyard Hotel Limited) f32J the Supreme Court after making

 -J35-
•
reference to the Kayanje Farming Ltd and the Development Bank of

Zambia cases, went further to state that;

"Clearly, the two authorities are on point in this case as the

plaintiff had d efaulted in its loan obligations which default
prompted the 1 st defendant to exercise its rights under the
floating debenture and to appoint the 2 nd and 3 rd defendants as
joint receivers and managers of the plaintiff company. Without a
doubt, the plaintiff is disentitled from seeking the aid of equity
and there can be no doubt that the injuctive relief granted, to the
plaintiff created conditions favourable only to the plaintiff at the
expense of the charge holder. As we see it, there was no
uncertainty regarding the issue of default to be determined at
trial."

On the issue of whether the respondent would suffer

irreparable loss and injury unless the injunction is granted, we

h old the view that the respondent has not established that it will

suffer irreparable los s which cannot be adequately compensated

by an award of damages.

The respondent contends that it will suffer the following

unatonable damages; law suits by its employees and suppliers of

materials as well as the anticipated termination of loan facilities

obtained from other financial institutions. Further, its brand and

goodwill cannot be atoned for in damages. The respondent in the

court below sought da mages for lack of good faith, breach of duty

of care and negligence in invoking the receivership process;

 -J36-

damages for defamation and loss of opportunity as well as an

order to vary or restructure the settlement terms of the loan and

to settle the overdraft facility arrears in instalments. We hold the

view that the claims advanced can be adequately compensated by

an award of damages.

The respondent 1n challenging the appointment of

receiver/ manager raised the issue that its securities are valued

far more than the amount owed of US$12 million. It is trite that

parties in a contractual relationship are bound by the contract.

The value of the s ecurity is not a basis to challenge the

a ppointment of a receiver where the bank intends to realize the

security as a Debenture holder.

Clearly the appellant bank is in a position to compensate

the respondent and that capacity has not been challenged.

Conversely, it is the applicant who has no capacity to pay

damages. We refer to the financial constraints deposed to by the

respondent.

This brings us to the remaining issue, the holding by the

court that granting t h e injunction would terminate the whole

matter prematurely. We are of the view that the learned Judge in

the court below erred. Perusal of the amended claims at page 94

 -J37-
•
alluded to earlier are damages arising from alleged negligence,

which do not term inate upon refusal of the grant of an

injunction.

Having considered the principles applicable in injunctions,

it must be borne in m ind that we are essentially dealing with the

issue simply of whether one can injunct, restrain or prevent the

appointment of a Receiver /Manager pursuant to a Debenture

a greement. We are of the view that a debtor cannot restrain the

appointment of a receiver by a creditor pursuant to a debenture,

where there is clear defau lt by the debtor.

The default disentitles the applicant from seeking the aid of

equity. We therefore overturn the decision of the lower court and

discharge the interim injunction granted. For the forgoing

reasons, we allow th e consolidated appeal, with costs to the

appellant.

F. M Chisanga
JUDGE PRESIDENT
COURT OF APPEAL
-.

......... .. ............
F. M Chishimba DLY
COURT OF APPEAL JUDGE COURT 0 JUDGE