Melissa Supermarket Ltd and Anor v Stanbic Bank Zambia Ltd (CAZ Appeal 127 of 2020) [2022] ZMCA 17 (16 March 2022)

Key Facts

Transaction Type

Issues

• Whether the lower court erred in using the literal rule instead of the contra proferentum rule when interpreting clauses 4.5, 6.7, and 7.4 of the facility letter.
• Whether the 2nd appellant had a contractual relationship with the respondent bank and if the bank owed her a duty of care in relation to the mortgaged property.
• Whether the court below correctly awarded nominal damages of K9,999.00 for the breach of duty to provide services with reasonable care and skill.
• Whether the court below erred in restricting the audit period of the 1st appellant's bank account to 30th September, 2016 to 30th June, 2017 instead of an earlier date.
• Determining which party between the 1st appellant and the respondent bore the responsibility to insure the property subject to the mortgage.
• Whether the respondent unlawfully disclosed confidential information to third parties and the alleged loss suffered as a result of the said disclosure.
• Whether the court below failed to assess and evaluate all the evidence adduced by the parties, particularly PW1's alleged uncontested evidence and the appellants' submissions.

Holdings

• The bank's disclosure of credit data to the Credit Reference Bureau was lawful under the Banking and Financial Services Act. No evidence of unlawful disclosure or damages was provided.
• The 2nd appellant's contractual relationship with the bank via the mortgage did not extend to a duty of care under the facility agreement. Her claims for damages related to the fire were not upheld.
• The facility letter's clauses were clear and not ambiguous. The literal rule was correctly applied, and the contra proferentum rule was not necessary.
• The court confirmed that the 1st appellant, as borrower, was obligated to insure the mortgaged property under clauses 6.7 and 7.4 of the facility letter. The bank's previous actions of force-insuring did not alter this responsibility.
• The audit period was adjusted from September 2016 to March 2016, based on evidence of earlier mismanagement traced to an email dated 16th March 2016.
• The lower court's award of nominal damages (K9,999) was appropriate as the appellants failed to prove actual loss. Punitive and exemplary damages were not warranted.

Remedies

• The court awarded the 1st appellant K9,999.00 in nominal damages for the respondent's breach of duty to provide services with reasonable care and skill, along with interest.
• The court ordered an audit of the 1st appellant's account with the respondent bank, extending the period to 1st March 2016 to 30th September 2017, based on evidence of earlier mismanagement.
• The court ruled that each party shall bear its own costs, overturning the lower court's award of costs to the 1st appellant.
• The court dismissed the appellants' claims for punitive and exemplary damages, finding no conduct by the respondent that warranted such awards.

Monetary Damages

Legal Principles

• The court applied the ejusdem generis principle (general provisions yielding to specific ones) to interpret the facility letter. Clauses 6.7 and 7.4, which specifically address insurance obligations, were given precedence over the general cost-recovery provisions in clause 4.5. This resolved the dispute over which party bore the insurance responsibility.
• The court acknowledged the contra proferentum rule (constructing ambiguities against the drafter) but determined it was inapplicable. Clauses 4.5, 6.7, and 7.4 were deemed clear and unambiguous, with no evidence of drafting ambiguity. The rule was explicitly rejected as a basis for reinterpreting the contractual obligations.
• The court held that the appellants failed to meet the burden of proof for claims of punitive damages, exemplary damages, or loss of goodwill. No evidence of actual injury or financial loss was adduced to support these claims, leading to their dismissal. The burden of proof for overturning the lower court's factual findings was also deemed unmet.
• The court examined the duty of care owed by the bank to the 2nd appellant as a mortgagor. It held that the bank's obligations were limited to the mortgage agreement, which required the mortgagor (not the bank) to insure the property. The facility letter's terms were not binding on the 2nd appellant, who had no contractual relationship with the bank beyond the mortgage.
• The Court of Appeal applied the literal rule of interpretation, holding that the facility letter's clauses must be construed according to their ordinary grammatical meaning. The court rejected the appellants' argument that the contra proferentem rule should apply, finding no ambiguity in the clauses. This principle was central to determining the obligation to insure the mortgaged property.

Precedent Name

• Konkola Copper Mines Plc v Mitchell Drilling International Limited & Another
• Finance Bank Zambia Limited v Simataa Simataa
• Mohammed v Attorney General
• Stanbic Bank Zambia Limited v A.S and C Enterprises and Other
• Savenda Management Services v Stanbic Bank Zambia Limited
• The Attorney-General v Marcus Kampumba Achiume
• Paul Roland Harrison v The Attorney General
• Wilson Masauso Zulu v Avondale Housing project Limited
• Zambia Seed Company Limited v Chartered International (Pvt) Limited
• Saviour Chibiya v Chrystal Garden Lodge & Restaurant
• Michael Chilufya Sata v Zambia Bottlers Limited
• Friday Mwamba v Sylvester Nthenge, Monica Kaping'a & Derrick Chekwe
• Chrismar Hotel Limited v Stanbic Bank Limited
• Nkhata & Four Others v The Attorney-General Of Zambia
• Mhango v Ngulube
• MTN Zambia Limited v Investrust Bank Plc
• A Vander Walt Transport (Namibia) Limited v Dar farms & Transport Limited
• Continental Restaurant and Casino Limited v Arida Mercy Chului

Key Disputed Contract Clauses

• Clause 4.5 granted the bank the right to debit the borrower's account for costs like insurance premiums. The court clarified this clause did not impose an independent obligation on the bank to insure but allowed recovery of costs if the bank incurred them on the borrower's behalf.
• Clause 7.4 of the facility letter required the 1st appellant (borrower) to maintain full insurance coverage on assets pledged as security to the respondent bank. The court interpreted this as a clear, unambiguous obligation, rejecting the appellants' argument that the bank was responsible for insurance.
• Clause 6.7 stipulated that the bank would provide facilities only if the borrower ensured all risks insurance cover for the full market value of secured assets. The court held this clause explicitly placed the insurance responsibility on the borrower, not the bank.

Cited Statute

• Banking and Financial Services Act (Provision of Credit Data and Utilization of Credit Reference Services) Directive, 2008
• Banking and Financial Services Act, 2017
• Competition and Consumer Protection Act No. 24 of 2010
• High Court Act Chapter 27 of the Laws of Zambia
• Credit Data (Privacy) Code
• Banking and Financial Services Act Chapter 387 of the Laws of Zambia (repealed)

Judge Name

• N. A. Sharpe-Phiri
• F. M. Chishimba
• J. Chashi

Passage Text

• We find no merits in grounds 1 to 13, save for grounds 14 and 15 relating to the period of the audit of the 1st appellant's account.
• The email of 16th March, 2016 does show that the 1st appellant was discontented with interest and commissions that had been levied on them. The email further complains of '...major mistakes ... on a lot of debits by double debiting ... or over crediting, then transacting and then making it correct.'
• A reading of clauses 6.7 and 7.4 cited earlier clearly provided that the borrower (1st appellant) would provide all risks insurance cover and ensure that the assets held as security by the bank is fully insured.

Damages / Relief Type

• Mandatory injunction ordering audit of the 1st appellant's bank account from 1st March 2016 to 30th September 2017.
• Dismissal of claims for punitive and exemplary damages due to insufficient evidence of malice or fraud.
• Award of K9,999.00 in nominal damages for breach of duty of care to provide banking services with reasonable care and skill, plus interest.