IN THE HIGH COURT OF MALAWI
COMMERCIAL CASE NUMBER 22 OF 2012
RICHARD RAJAB KARIM T/A PAWOOH
TIMBER CARPENTRY AND JOINERY PLAINTIFF
INDEBANK LIMITED FIRST DEFENDANT
THE ATTORNEY GENERAL SECOND DEFENDANT
CORAM: THE HONORABLE MR. JUSTICE L P CHIKOPA
W Kita Mr. of Counsel for the Plaintiff
A Muhome Mr. of Counsel for the First Defendants
Mvula Senior State Counsel for the Second Defendant
D Banda, Court Clerk
We as much as possible stick to proven facts.
The plaintiff was at all material times the registered owner of Title Number 81436. That property has since been sold by the first defendant in exercise of a mortgagee’s power of sale to a Mr. Abraham Maluwa Mbewe[Mr. Mbewe]. The plaintiff contests the propriety of such sale. He has brought this summons seeking:
a. A declaration that the first defendant illegally sold the Plaintiff’s Title No 81436 by exercising a power of sale under a mortgage when no such mortgage was ever created and executed by the plaintiff for the sum of K15,000,000.00 and no such mortgage was registered with the Deeds Registry to that effect;
b. A declaration that the first defendant illegally sold the plaintiff’s Title No 81436 without serving the plaintiff with any requisite Notice before the sale;
c. A declaration that the first defendant sold the Plaintiff’s Title No 81436 in bad faith at a price of K17,500,000.00 when at the time of executing the Loan Agreement the Plaintiff’s title was valued at K23,000,000.00 by the first defendant’s own recommended valuer and that within the month of sale its value was at K48,000,000.00;
d. A declaration that the first and second defendants illegally assigned the plaintiff’s Title No 81436 on behalf of the first defendant to a Mr. Maluwa Abraham Mbewe when there was a caution duly registered on the Title forbidding the registration of any dealings therein and that the said caution has not been legally removed to date;
e. An order that the assignment herein be cancelled and the Tile revert back to the Plaintiff or in the alternative;
f. An order that the defendants do compensate the plaintiff with the current market value of Title No 81436; and
g. An order for costs.[Sic]
We have given sufficient of them above.
This matter is still a civil matter. It is the obligation of he who alleges to prove their allegation on a balance of probabilities.
We think it better that we revert to the other law applicable herein as we decide on the issues.
Going through the facts it is clear that this matter revolves around the sale of Title Number 81436 by the first defendant to Mr. Mbewe. This was premised on the fact that there was some mortgage courtesy of which the first defendant had the power to sale in case of default. The question we need to ask and answer therefore is whether there was as a matter of fact such mortgage and therefore such power. The plaintiff answers both questions in the negative. The first defendant answers in the positive while the second defendant quite frankly does not care. Allied to the above question is whether assuming the mortgage and power existed at the material time the same was properly exercised. The plaintiff is also of the view that it was not. He has his reasons for so thinking. The first defendant thinks otherwise. The second defendant again thinks it is none of his concern. The last issue relates to the manner in which Title Number 81436 was transferred to Mr. Mbewe. The plaintiff thinks it was in breach of a caution and therefore the law. He has his reasons therefor. The defendants think not. The question being which is which.
THE PARTIES’ ARGUMENTS
Did The First Defendant Have The Power To Sale Title Number 81436?
The first defendant answered the question in the affirmative. The plaintiff maybe not surprisingly in the negative. We look at their respective positions.
The plaintiff contends that the first defendant had no power of sale in respect of Title Number 81436. For him the reasons are simple enough. There was no mortgage in relation to the property. The question of a power of sale does not cannot even therefore arise. Exhibit RR3 the collateral mortgage was for a loan [since repaid] of K12,000,000.00 which the plaintiff obtained on March 15, 2008. That mortgage cannot in his view be in respect of a loan that was extended in July 2010. Much the same was said in respect of exhibit AM1. It is security for a loan other than the one referred to in exhibit RR1. But more than that the plaintiff doubts the veracity of exhibit AM1. There is nothing to show that it was duly registered at the Deeds Registry. On the other hand there was evidence namely exhibit RR4 a Certificate of Official Search to show that such document was never registered at the Deeds Registry and cannot therefore be in existence. Quite apart from the foregoing the plaintiff also contends that there is as a matter fact no first mortgage prepared in terms of Clause 10.1 of exhibit RR1. The plaintiff’s conclusion is therefore that there was no mortgage over Title Number 81436 in respect of the K15,000,000.00 referred to in exhibit RR1. There being no such mortgage there cannot, in the view of the plaintiff, be any talk of the first defendant having any power to sale Title Number 81436.
Secondly and even if the mortgages existed in the nature of exhibits RR3 and AM1 no power of sale would arise therefrom according to the plaintiff. The said mortgages are according to the plaintiff null and void for want of registration. Exhibit RR1 was executed on March 8, 2008. It was registered at the Deeds Registry on April 2, 2009. That is in flagrant breach of section 7(1)(a) [which requires that documents such as exhibit RR3 should be registered within three months of their execution if executed within Malawi] as read with section 28 of the Deeds Registration Act. Exhibit AM1 on the hand has no record that it was registered with the Deeds Registry going by exhibit RR4 the Certificate of Official Search. The conclusion according to the plaintiff has to be that it was never registered at all which makes it no different from exhibit RR3. Both exhibits are null and void and incapable of being a mortgage as at law understood. They are therefore incapable of affording the first defendant any power of sale in relation to the property Title Number 81436.
In answer to the above question the first defendant pointed us to exhibits RR3 and AM1. The former is a collateral mortgage entered into between the plaintiff and the first defendant to secure banking and other financial facilities in the sum of K12,000,000.00. The latter is a Further Collateral Mortgage between the same parties to secure additional banking and other financial facilities up to but not exceeding K3,000,000.00. The sum total came up to K15,000,000.00 which according to and in so far as we understood the first defendant was the K15,000,000.00 referred to in exhibit RR1 the Loan Agreement between the plaintiff and the first defendant dated July 10, 2010. According to the first defendant the two mortgages were in tandem with the plaintiff’s and the first defendant’s intention intended to secure the said K15,000,000.00. And also that the said documents be for all intents and purposes read as one. The first defendant alleges that the said mortgages provided for the sale of Title Number 81436 if the plaintiff defaulted on loan repayments. That the said plaintiff having so defaulted the first defendant acted within its rights by exercising such power of sale and selling the property in issue in such lawful manner as it deemed fit.
Regarding the lack of registration the first defendant contends that the failure to register exhibit RR3 was excusable. Exhibit RR3 is dated March 25, 2008. The consent to do the mortgage was only granted on March 10, 2009. It was then registered on April 2, 2009. The failure to register within three months of execution cannot therefore be the first defendant’s fault. They could not have registered it minus the Government of Malawi’s consent. As for exhibit AM1 the first defendant contends that the same was registered. Proof of that was allegedly contained in a document sent to us courtesy of the first defendant’s letter of December 4, 2012. This document was described as a back cover of exhibit AM1. And it was from this back cover that we are supposed to conclude that exhibit AM1 was in fact registered at the Deeds Registry within three months of execution. Further the first defendant thinks that section 28 of the Deeds Registry does not apply in the instant case. Only to instances where the documents have not actually been registered. Such documents would indeed be null and void. Herein the documents were registered albeit late. They cannot therefore be the subject of the sanction provided for in section 28 abovementioned.
Was The Alleged Power Of Sale Properly Exercised?
The plaintiff raised four issues. First that he was not as is required by law notified of the impending enforcement of security, secondly that there was in fact no default warranting a realization of the security, thirdly that the first defendant acted in bad faith and fourthly that the assignment was attended with impropriety.
Was The Plaintiff Notified Of The Sale Of The Property?
The plaintiff answered in the negative. According to him whereas it might be true that certain notices were authored the same were not served on him. These are exhibits AM 6 and 7. They are uncertified copies of letters to the plaintiff. Exhibit AM 6 is dated June 15, 2011 and sought to inform the plaintiff that if he did not liquidate the debt in full within 14 days from the date thereof or by June 29, 2011 the first defendant would proceed to realize its security. Exhibit AM7 is also a letter dated July 20, 2011. It advised the plaintiff that if he did not liquidate the debt within 7 days from the date thereof the plaintiff would enforce its securities. Exhibit AM6 specifically mentioned Title Number 81436. Exhibit AM7 did not. In the view of the plaintiff the two documents do not amount to notice as envisaged under exhibits RR3 and AM1. Even exhibit RR3 if a mortgage had been done under it. Thereunder the notices should have been sent by prepaid post addressed to the Borrower[i.e. plaintiff] at its Registered Office given in the said exhibits. To prove notification/service the plaintiff thinks the first defendant should have proved on a balance of probabilities that the letters were sent as stipulated in the mortgages. Not having so proved there cannot be service/notification. The case of Chitete v Mzuzu City Assembly Civil Cause Number 125 of 2005 High Court of Malawi Mzuzu Registry[unreported] was cited.
The first defendant argues there was in fact notice. It points to exhibits AM6 and 7. It also contends that the notices must have reached him. That explains why he went about seeking an injunction to prevent the sale of the property in issue. See also exhibit AM4 which is a letter from the plaintiff’s erstwhile lawyers trying to prevent the sale of Title Number 81436. According to the first defendant it is enough that the notices were written.
Was There As A Matter Of Fact A Default?
In terms of exhibit RR1 the plaintiff says no. According to Clause 7.1 of exhibit RR1 the K1,5000,000.00 facility was meant to run from July 7, 2010 for 24 months. It did not even provide for installments. By the plaintiff’s arithmetic the loan was supposed to expire on July 7, 2012. He could therefore only be in default if the loan remained unpaid after July 7, 2012. By realizing the security in December 2011 the first defendant acted prematurely and in the absence of a default. Before the power to sale had crystallized. Further the plaintiff opines that by the time Title Number 81436 was sold the loan had already been repaid.
The first defendant believes there was a default. It referred to paragraph 7 of Mr. Muhome’s affidavit which in turn makes reference to Paragraph 7.1 of exhibit RR1 the Loan Agreement. The Loan Agreement in its view expired on or about July 7, 2011. The realization of security took place in December 2011. It cannot be argued that there was no default.
Did The First Defendant Sale The Property In Bad Faith?
The plaintiff leveled two allegations. First that the first defendant went ahead to sale the property in spite of the fact that there was no default and secondly that they sold it at K17,500,000.00 when they were aware that the property had been valued by their own valuer at K23,000,000.00 in 2009 and K48,000,000.00 in March 2012 for insurance purposes. In respect of the alleged nondefault the plaintiff contends that exhibit RR1 was meant to expire on July 7, 2012 while the facilities covered by exhibits RR3 and AM1 were paid up by the time the property was sold to Mr. Mbewe.
In response the first defendant contends that there was in fact a default entitling it to sale the property. See paragraph 7 of Mr. Muhome’s affidavit. Further and in relation to selling price the first defendant contended that its obligation was only to act in good faith in the interests of the plaintiff not necessarily to hold out for the best price on the market.
Did The Defendants Illegally Assign Title Number 81436 To Mr. Abraham Maluwa Mbewe?
The plaintiff claims illegality because the assignment was in breach of a caution validly entered by the plaintiff. The caution was entered on December 22, 2011.
The first defendant raised two responses against the foregoing. The first we understood it to mean that Mr. Mbewe was a bona fide purchaser for value who should seek solace in equity. Secondly that the Deeds Registration Act Cap 58:01 does not apply to Cautions. The result is that the cautions lodged by the plaintiff and the second defendant were both void and of no effect. There was therefore no impropriety with the second defendant registering the assignment to Mr. Mbewe according to the first defendant.
The second defendant, difficult to comprehend as he was, felt he should not even be a party to these proceedings. That notwithstanding he contends that he was within his rights to disregard the plaintiff’s caution. According to him the original assignment to the plaintiff had been done in error. The plaintiff’s caution was based on that defective assignment. It was the right thing to do to get the assignment to the plaintiff off the record and with it the cautions lodged by the plaintiff and Mr. Mbewe.
The defendants are both in the wrong according to the plaintiff. Section 3 of the Deeds Registration Act applied to cautions them being documents that affect interests in land. Once lodged a caution should therefore be abided by until lawfully removed. Seeing as the plaintiff’s caution remains on record to this date the second defendant should not have permitted a registration of the assignment to Mr. Mbewe.
The plaintiff thought the second defendant had no clue whatsoever about the issues in this case. He has however no doubt that the second defendant contributed towards his loss of Title Number 81436 and should equally be liable.
THE COURT’S CONSIDERATION OF THE ISSUES
DID THE FIRST DEFENDANT HAVE A POWER TO SALE TITLE NUMBER 81436?
The power is alleged to have been derived from two mortgages. One in respect of K12,000,000.00 dated March 25, 2008 and another for K3,000,000.00 dated August 10, 2010. Even a cursory look at these documents will leave no one in any doubt whatsoever that they were in relation to transactions other than the one referred to in exhibit RR1. Exhibit RR3 was for a transaction entered into between the first defendant and the plaintiff in March 2008. It is to stretch creativity close to incredulity to think that exhibit RR3 is the first mortgage referred to in Clause 10.1 of exhibit RR1. Much the same we will say about exhibit AM1. Clearly exhibit RR1 envisaged a first legal charge over Title Number 81436 other than exhibits RR3 and AM1. The facility envisaged in exhibit RR1 was also other than the K12,000,000.00 extended in 2008 or the K3,000,000.00 covered under exhibit AM1. Whereas therefore there was an agreement to create a first legal charge as security for the financial/banking facility extended via exhibit RR1 we find as a fact that no such charge was in fact created. Exhibits RR3 and AM1 were clearly for different transactions. And because there was no mortgage over Title Number 81436 there could never have been in respect thereof any power of sale in favour of the first defendant. The first defendant contended that the figure K15,000,000.00 was an amalgamation of the sums in exhibits RR3 and AM1 and that the parties always intended exhibits RR3 and AM1 to be the first legal mortgage referred to in paragraph 10.1 of exhibit RR1. If such was the intention then we are afraid the same is not evident from exhibit RR1the loan agreement indeed from exhibits RR3 and AM1. There is a lot of truth in the contention that we are talking here of an unsecured debt.
Then there is the matter of registration. The first defendant contended that the power of sale exercised herein was that afforded to them under exhibits RR3 and AM1 being securities for the facilities extended under the said documents. We agree with the plaintiff that that cannot be. Exhibits RR3 and AM1 are null and void for want of registration under the Deeds Registry. Section 7(1)(a) of the Deeds Registration Act provides that:
(1) In the case of any deed or document the registration of which is declared by this Act to be compulsory –
a. Where such deed or document is executed after the commencement of this Act the same shall be presented for registration within three months from the date of its execution if executed within Malawi;’
Section 28 of the Deeds Registration Act on the other hand provides that:
‘the non-registration of a document the registration of which is compulsory according to this Act will render such document null and void’.
There is no disputing that both exhibits RR3 and AM1 should have been registered at the Deeds Registry within three months of their being executed. Exhibit RR3 was registered later than a year after execution. It clearly is null and void. The first defendant thinks not. Firstly because the failure to so register was no fault of its own. It was waiting for consent from Malawi Government. Secondly because section 28 abovementioned does not apply to documents that have actually been registered albeit late. The first defendant has no leg to stand on. The law is clear enough. Exhibit RR3 should have been registered within three months of it being executed. It was not. It is at law null and void. It matters not that registration delayed because the first defendant was waiting for government consent. It was, if they must be told, folly on the first defendant’s part [for which it should bear the consequences] to have allowed exhibit RR3 to be executed before government consent was at hand. Had it waited until it had the consent before execution we doubt whether such a problem would have arisen. For the avoidance of doubt we will reiterate that what the law demands is not just registration but registration within a specified period to wit three months. Late registration does not retrieve the situation. It would if it did make nonsense of the three months time specification. Exhibit RR3 was and still is therefore null and void. It was and is incapable of conferring a mortgagee’s powers including the power to sale on the first defendant.
Exhibit AM1 poses a slightly different issue. On its face it does not indicate that it was registered either within three months of its being executed or at all. Exhibit RR4 the Certificate of Official search does not disclose the fact that the document was registered. The first defendant chose to say nothing about the foregoing. Instead and after this case had been adjourned for judgment it sent us a letter to which was attached what it called the back cover of exhibit AM1. We are supposed to conclude therefrom the fact that exhibit AM1 was not just registered but that it was registered within three months of its being executed. We are unable to do that. To begin with the introduction of the back cover to these proceedings is if truth be told an attempt at introducing further evidence beyond the closure of a case. It is not unheard of. Just that where it has been allowed there must be a formal application from the party seeking to introduce the extra evidence complete with reasons not just stating why they want to do that but also why they could not do it during the normal trial. Unless otherwise stated the other party would also be allowed to put in their tuppence’s worth for or against such an application. The above has not happened herein. We are loathe to allow the first defendant to get via the backdoor what they should be accessing via the front door. We would therefore not accept into our body evidence the alleged back cover. Meaning that there would be no proof on a balance of probabilities that exhibit AM1 was ever registered with the Deeds Registry. It is also null and void for want of registration. But even if we were to allow its introduction we think it would at best be unsworn evidence. Of very little, if any, probative value and most likely hearsay. Maybe Mr. Muhome should have introduced the back cover via an affidavit like he did with the rest of the first defendant’s evidence. Not that it would have helped that much. The back cover is a copy of some original. There was nothing on its face however to certify that it was a true copy of such original. Or to suggest that it was prepared by Mr. Muhome. Can Mr. Muhome bring it in as evidence in this court? We doubt. And if you closely examine the totality of exhibit AM1 it is obvious that our concerns about its veracity are not unfounded. Exhibit AM1, also an uncertified copy, has an alteration of the date on which it was executed. The date originally was August 19, 2008. It has been changed to August 19, 2010. We do not know who made the change. Whether or not it is a genuine change. For what purpose and therefore what the date of execution actually is. We cannot also not determine with any degree of certainty, following the doubts about the date of its execution, whether exhibit AM1was indeed registered as per section 7(1)(a) of the Deeds Registration Act. The conclusion is not much different from that arrived at in respect of exhibit RR3. It is more probable than not that exhibit AM1 was never registered with the Deeds Registry. It is therefore also null and void and incapable of vesting any power including the power of sale on the first defendant in respect of Title Number 81436.
WAS THE PLAINTIFF NOTIFIED OF THE IMPENDING REALIZATION OF SECURITY?
We have above put across the parties’ positions. For our part we think the determining provision is Clause 6(b) of both exhibits RR3 and AM1. A notice thereunder could be:
‘made by letter sent by prepaid post addressed to the Borrower at its Registered Office …… or at the last known place of business of the Borrower……’
In the case of Chitete v Mzuzu City Assembly we opined that it was not enough that a letter was written. Or a notice authored. It also had to be shown that the conduct of the party in relation to the handling of the notice complied with its obligations under the governing contract. In the instant case, and we daresay in Chitete’s case, it is clear that the obligation of the parties in so far as notices are concerned went beyond mere authoring thereof. It had to be shown that the same were sent in the manner specified in the contract. In the instant case when the first defendant contends that it sent notices it should also show on a balance of probabilities that they sent the same by inter alia bringing testimony viva voce or by affidavit from the sender. The question being did they? Going entirely by the first defendant’s story it is clear that all that happened is the authoring of exhibits AM 6 and 7 the two notices. There was no evidence that the same were sent as demanded in Clause 6(b) abovementioned or at all. Or who sent them. Clearly there is no proof to the requisite standard that the notices were sent. There cannot therefore be proof that the plaintiff was notified of the impending sale of Title Number 81436. See Chitete’s case. The first defendant contended that exhibits AM4 and RR5 are clearly indicative of knowledge on the plaintiff’s part of the impending sale of Title Number 81436. That the fact that the plaintiff was up and about seeking an injunction against such sale was evidence of the fact that he was aware of such sale. In other words saying that because he knew he must have been notified. The first defendant has gotten the wrong end of this debate. To begin with the question is not whether the plaintiff was aware rather whether he had been notified. It is possible for one to be aware without having been being notified which in our view was the case herein. The obligation on the first defendant’s part was to notify the plaintiff. That the plaintiff somehow became aware is of no consequence in our view. It should also be realized that the plaintiff according to his affidavit investigated rumors that his property had been sold. He was entitled to investigate such rumors and take steps to protect what was his own depending on what he learnt. It cannot however at the same time be concluded that having somehow got to know of the adversity then he was notified. Our conclusion is that the first defendant did not notify the plaintiff of the impending sale of the property in issue as was its obligation.
WAS THERE A DEFAULT WARRANTING A SALE OF THE PROPERTY?
Again we will not belabor the point. If there was a default it is clear that the same could never have been in respect of the K15,000,000.00 facility granted via exhibit RR1. Default therein could only have happened after July 7, 2012. If there was default therefore it should be in respect of exhibits RR3 and AM1. The question being whether there was such default. This question has to be answered with reference to the time at which the property was sold. If we go back to the parties’ evidence there is no doubt that the plaintiff discharged his liabilities to the first defendant on December 21, 2011. Had on that date Title Number 81436 been sold to Mr. Mbewe? The answer is in the negative. By a letter of December 14, 2011 exhibit LM4 the first defendant advised the plaintiff that it would proceed to sale the mortgaged property because the plaintiff had failed to repay the loan. By another exhibit LM9 dated December 21, 2011 the first defendant advised that it had sold the property to Mr. Lizulu who unless we are hopelessly wrong cannot be the same as Mr. Mbewe. The question being when was Title Number 81436 sold to Mr. Mbewe? When was the decision to sell made? Surely it cannot be before December 21, 2011. It can only be after December 21, 2011. After, if we might say so, the plaintiff had already paid off the loan on December 21, 2011. The assignment to Mr. Mbewe is dated January 23, 2012. The consent was granted on December 30, 2011 and it was registered on March 8, 2012 all this after the plaintiff had paid off the loan. It is clear that the sale of Title Number 81436 was done before the plaintiff had defaulted either under exhibit RR1 or under exhibits RR3 and AM1 assuming that the two are worthy documents.
DID THE FIRST DEFENDANT ACT IN BAD FAITH?
There are two aspects to this allegation. First that the money paid was too low in view of the fact that the property had been valued at K23,000,000.00 in 2009 by the first defendant’s valuer and K48,000,000.00 for insurance purposes in 2012. Secondly that the first defendant sold the property before the plaintiff defaulted.
We should make it clear that it is one thing to allege bad faith and quite another to prove the same. In the instant case it is as the law provides for the plaintiff to prove on a balance of probabilities that the first defendant acted in bad faith. In so far as the price is concerned we do not think that the duty imposed on the seller is to get the highest price. Rather it is to while not acting against the best interests of the mortgagor get what is in the circumstances the best available price on the market. The seller will not therefore be deemed to have acted in bad faith merely because the price offered and accepted is below a valuation of the property. It must be shown that in accepting the lower price the seller did not act in the known best interests of the borrower before bad faith is regarded as proven. Coming back to this our case it is true that there was a valuation of K23,000,000.00 done in 2009. But that is not the price the market offered when the property was put up for sale. It is also true that the property was valued for insurance purposes at K48,000,000.00. It is also equally true that nobody offered that price for the purchase of the property. And while we are at it let us say that a valuation for purposes of buying/selling should be differentiated from an insurance valuation. The latter is influenced by the sums the insured is willing and able to pay as premium and also the sum he wishes to get when the event against which insurance is taken out happens on the one hand and the risk the insurer is willing to take on. Whereas it might be true that an insurance valuation may have a relation to the property’s market value such is often not the case. We do not therefore agree that in accepting the price of K17,500,000.00 the first defendant acted in bad faith merely because the property had been insured in the sum of K48,000,000.00.
Coming to selling when to when the plaintiff was not in default we think we should also proceed with care. Bad faith should be differentiated from an act of negligence. An act of bad faith in our view is an act that proceeds in reckless disregard as to its propriety. In the instant case it should be shown that the first defendant proceeded to sell without paying sufficient regard as to inter alia whether the loan had been discharged or not. An act of negligence on the other hand proceeds in a manner that falls short of that which we have come to expect from reasonable persons in the actor’s position. In the instant case we would therefore be talking of a reasonable banker. The question therefore is whether or not the first defendant acted in bad faith or was merely negligent. On the facts by letter dated December 15, 2011 exhibit AM4 the first defendant was made aware of the loan balance namely K5,880,169.16 and when it would be paid namely December 16, 2011. The first defendant was reluctant not allow redemption sell because they had already sold the property to one Lizulu. The loan was nevertheless discharged on December 21, 2011. The property was then sold to Mr. Mbewe. It should have been clear to the first defendant beyond December 21 that the loan had been repaid. Unless it did not matter to them whether or not it had or it did not care to check. Meaning that when the first defendant was transacting with Mbewe, when it was getting the consent, when it was getting the Malawi Revenue Authority clearance, when it was executing the assignment and having it registered it was aware that the loan had been repaid. It could have at any time pulled the sale or at the very least tried to. It did not. It proceeded as if all was in order when it should have been clear that it was not. The impression given is that the first defendant was intent on having the property sold. But then the above is only part of the story. It should be remembered that the facility offered via exhibit RR1 was meant to run for 24 months. From July 7, 2010 to July 7, 2012. Somehow the first defendant calculated 24 months to expire on July 7, 2011, proceeded to deem the plaintiff as having defaulted and sold the property in issue. Such conduct in our view goes beyond mere negligence. It is recklessness of such a degree the first defendant could only have been acting in bad faith. The first defendant acted in bad faith when it sold the property to Mr. Mbewe in our judgment.
DID THE DEFENDANTS ILLEGALLY ASSIGN TITLE NUMBER 81436 TO MR. ABRAHAM MALUWA MBEWE?
The first defendant thinks not. The buyer is a bona fide purchaser for value and should be afforded protection in equity. Any assignment to him of Title Number 81436 should not therefore be illegal. Further the first defendant thinks the Deeds Registration Act does not apply to cautions. Meaning that one need not register a caution and that even if one does one need not take cognizance of it. The first defendant is wrong on both scores. It is clear to us that Mr. Mbewe could not have been an unsophisticated buyer. He after all lodged a caution of his own on December 20, 2011 to protect his interests in the land. He then later went to remove that caution in order to register the assignment to him of Title Number 81436. The caution lodged by the plaintiff was lodged on December 22, 2011. It is still alive. It is impossible in our view for the second defendant to have had his assignment registered without taking notice of the plaintiff’s caution. He either deliberately took no notice of it or somehow had it ignored by all and sundry. Either way he is far from being a bona fide purchaser. It is also clearly not true that the Deeds Registration Act does not apply to cautions. Under that Act all documents that pass any interest in land or affect land should be registered. See section 3 thereof. A caution passes interest in land. It affects land. It must therefore be lodged/registered at the Deeds Registry. Such registration could not have been intended for cosmetic purposes. To be disregarded when it came to processing land rights. A caution’s purpose is therefore clear enough. To preserve the status quo while disputes about land rights are being resolved. In the instant case there is no doubt that there was a caution lodged by the plaintiff against the registration of any land rights in respect of Title Number 81436 while he tussled with the first defendant. The second defendant should not therefore have registered the assignment to Mbewe in total disregard thereof. Not that the first defendant fared any better. They are again not unsophisticated. It could not have been getting consents and executing the assignment without first finding out whether or not there were no impediments to such assignment. Not that it matters if they did not. The Deeds Registry is a public office. The documents lodged thereat are public documents. They could have been accessed [including the plaintiff’s caution] easily enough. When the first defendant alleges it did not it is either it is being economical with the truth, was lacking in diligence or it did not care about the cautions anyway. Any which way it only have itself to blame. The conclusion is inescapable. The defendant were party to an illegal assignment of Title Number 81436 to Mr. Abraham Maluwa Mbewe.
The plaintiff sought various declarations and orders. We have outlined them hereinabove. We will not do so again. Suffice it to say that the plaintiff sought a declaration that the first defendant illegally sold Title Number 81436 when it had no power to do so and in the absence of a requisite notice. We have above found that there was no mortgage in respect of the K15,000,000.000 facility made available via exhibit RR1. Exhibits RR3 and AM1 under which the first defendant later sought sojourn were themselves null void and of no effect for not bearing any relationship to exhibit RR1 and on the other hand for not being compliant with the Deeds Registration Act section 7(1)(a) thereof. There was there being no mortgage no power of sale courtesy of which the first defendant could have sold Title Number 81436. Similarly we have also concluded that in exercising whatever powers the first defendant thought they had, they never as was by law required notify the plaintiff. A declaration is therefore granted to the effect that the first defendant illegally sold Title Number 81436.
A declaration was also sought to the effect that Title Number 81436 was sold in bad faith. The Same is hereby granted. But not because of the price at which it was sold. Rather because the property was sold despite the fact that the plaintiff had not defaulted on his loan obligations at the time of the sale.
Another declaration was sought to the effect that the defendants illegally assigned Title Number 81436 in blatant disregard of a caution against such registration/assignment. That is also granted. Again we have demonstrated above how by their combined efforts the defendants somehow managed to circumvent a lawful caution.
The plaintiff then sought two orders. On the one hand he asked that the assignment to Mr. Mbewe be cancelled and the property reverted to him. In the alternative he asked that he be compensated for the loss of Title Number 81436. We do not think that we will do this case justice if we ordered a cancellation of the assignment and reversion of the property to him. Whatever role the plaintiff played in the transfer of the property to him, and we should be honest we have not been told anything in that regard, the truth of the matter is that he paid a price asked of him by the first defendant. More than that he has not been heard herein. The better way forward we think is to compensate the plaintiff for the loss of his property. The plaintiff thinks the compensation level should be the current market value of the property. We do not know how we are going to get to such value. It is quite possible that the current owner has made improvements thereon. We should however be able in our view to properly compensate the plaintiff for his loss by taking the market value of the property at the time of assignment to Mr. Mbewe as his capital investment and use that to put him in a position he would have been had Title Number 81436 not been wrongfully taken away from him. That value was according to the valuation by Msonda K23,000,000.00. We should then strive to arrive at a figure that the plaintiff would have realized had he invested that sum. We will do well we think if we borrowed a leaf from what the banks themselves do when lending money. Accordingly the plaintiff will receive as compensation for his loss from either of the defendants or both K23,000,000.00 plus interest at 5% above the first defendant’s prime lending rate calculated per month from the date of the assignment of Title Number 81436 to the date the said sum shall be fully paid over to the plaintiff. In case the parties are unable to agree as to the exact quantum the same shall be calculated by the District Registrar either way within 45 days from the date hereof.
The plaintiff will have the costs of this application.
Dated this February 7, 2013.
L P Chikopa