The Lusaka High Court has ordered that the matter in which Development Bank of Zambia (DBZ) has sued Foreign Affairs Minister Joseph Malanji and others over a loan facility be referred to the Deputy Registrar for assessment of the sums claimed by the bank.
High Court judge Kazembe Chenda has ruled that DBZ has proven on a balance of probabilities that there is a debt and that there is default by the respondents.
He, however, added that there is no conclusive evidence on the composition of the sum claimed of K5,590,468.74, as at August 25, 2019, versus the extent of principal debt at the time that the loan became non-performing.
In this matter, DBZ sued Malanji, Royal Gibson Hotel Limited, Benson Malanji and Gibson Power System Limited as respondents for payment of all outstanding payments due from the hotel to the bank of over K5 million as at August 25, 2019, under a loan credit facility availed to the hotel and secured by a legal mortgage over stand No. 7742, and third party mortgage over plot No. 1910, Kitwe.
Malanji has been sued as Guarantor and third party mortgagor while Benson and Gibson Power Systems Limited have been sued as Guarantors.
DBZ is further seeking an enforcement of a debenture over all the hotel’s assets and appointment of a receiver, as well as delivery of vacant possession of the mortgaged properties by the Hotel and the minister to the bank.
It further wants foreclosure and sale of mortgage properties, costs and any relief the court may deem fit.
In October this year, the respondents appointed Andrew Musukwa and Co to represent them but the law firm withdrew due to conflict of interest.
The respondents having not entered an affidavit in opposition to the originating summons, judge Chenda set Tuesday as the date of judgment in the matter.
But Malanji and the other respondents asked the court to vacate the order reserving judgment.
Malanji submitted that no party will be prejudiced if the order reserving judgment in the matter was vacated as it will accord all parties an opportunity to be heard and the matter to be deliberated upon on its merits.
He also argued that DBZ was the one that had breached the terms of the agreement because it released only 50 percent of the initial loan facility upon execution and delayed to release the other 50 percent by about three months, causing a severe disruption to the operation of Royal Gibson Hotel Limited.
However, judge Chenda, in his judgement delivered Tuesday, November 27, 2019, said he could not find any conclusive evidence of the composition of the sum claimed by the bank against what the principal debt was at the time the loan became non-performing within the statutory meaning.
Justice Chenda stated that it would therefore be speculative of him to determine whether the money was recoverable in view of the Consumer Protection provisions of section 109 and 110 of the Banking and Financial Services Act.
He ruled that the bank was entitled to all the remedies prayed for in view of the hotel’s default in its payment obligations.
“In view of the first respondent’s default in its payment obligations as guaranteed by the co-respondents, the applicant is entitled to all of the remedies as prayed for, subject to the lapse of a reasonable grace period to be afforded for the equity of redemption before enforcement of the legal mortgage and third party mortgage,” judge Chenda said.
He ordered that the matter be referred to the Deputy Registrar for inquiry or assessment of the sums claimed to determine the history and composition.
Judge Chenda stated that if the Deputy Registrar finds that the interest component of the sum claimed exceeded the principal amount owing when the facilities under the agreement became a non performing loan (NPL), then the said interest would accordingly be capped at the extent of the principal debt as at NPL date.
He added that should the inquiry instead reveal that the sums claimed fall within the permissible confines of section 109 and 110 of the Banking and Financial Services Act, they shall be upheld accordingly.
Judge Chenda said after inquiry by the Deputy Registrar, the sums awarded to the bank shall be paid by the hotel.
He further ordered that the judgement sum shall bear interest at the agreed contractual rate under Clause 6 of the facility agreement from August 22, 2019 until the date of payment.
Judge Chenda also ordered that the hotel should pay the bank the judgment sum and interest within 120 days from the date of award by the Deputy Registrar.
“…failing which the bank would be at liberty to enforce its right under the debenture; and enforce the legal mortgage and third party mortgage and foreclose on, repossesses and sale the mortgage properties; namely stand No. 7742, and plot 1910, Kitwe,” the judge said.
He further ordered that should there be any unsatisfied balance of the judgment sum after fulfilment of the orders, the same shall be paid by Malanji, Benson and Gibson Power System Limited to the joint personal and corporate guarantee.
“Subject to the dictates of this judgment, the respondents shall also bear the agreed charges under Clause 7 of the facility agreement and Clauses 4 and 9 of the restructured facility agreement. Save for the costs of the inquiry by the Deputy Registrar of which each of the parties shall bear their own and the costs awarded prior to this judgment, which remain as is, the hotel shall pay the applicants costs of and occasioned by this action to be taxed in default agreement,” ruled judge Chenda.