COMMERCIAL TRANSACTIONS

There are two registries in the High Court: the Principal Registry (in Lusaka)
with District Registries (in Chipata, Livingstone etc) and the Commercial
Registry. The commercial registry is specifically designed to fast track the
adjudication of commercial disputes. The creation of the commercial list
(established on 3rd April 2000) arose from an amendment to the High Court
Act in 1999 and brought about Order 53 of the High Court Rules. Order 53 was
published under S.I No. 29 of 1999 and O.53, together with the Practice
Direction of 2000, contain the Rules regulating commercial actions. It is
necessary to stress that the other rules in the High Court Act apply to
commercial actions. E.g. it is permissible to obtain judgment in default of
appearance and defence if the defendant fails to appear. All that is required is
that before default judgment is entered, the plaintiff must file into court an
affidavit of service together with an acknowledgement of service as, once
judgment is entered, it cannot be reversed except for very good reason.

What is a “commercial action”? O. 53, rule 1 defines a commercial transaction

as “any cause arising out of any transaction relating to commerce, trade,
industry or any action of a business nature.” O. 53, rule 5(2) says “A Judge may
consider whether the cause of action and issues of fact and law likely to arise
or the procedure to be followed in an action make the action suitable for
inclusion or exclusion in the Commercial List.” These two rules have been
interpreted as excluding all applications for Judicial Review as the law
applicable to all Judicial Review applications is Administrative Law.

The commercial list was created as a fast track court for the sole purpose of
expediting court decisions in commercial disputes. It has its own unique rules
In O.53 and the 2000 Practice Directions. Before a Writ and Statement of
Claim are issued a Counsel must consider whether to file the action in the
Principal Registry or the Commercial Registry. The decision will of course be
based on O.53, rule 5(2). Counsel must consider the issues of fact, the law and
the procedure to be followed before proceeding to file an action in the
Commercial List Registry.

The High Court Rules, as amended in 1997, require that the Writ of summons
be accompanied by a Statement of Claim, and that the Memorandum of
Appearance be accompanied by a Defence. This applies to both the General
List and Commercial List

GENERAL LIST COMMERCIAL LIST

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Writ of summons & Statement of Claim Writ of summons & Statement of
Claim1
Memorandum of appearance & Defence Memorandum of appearance &
Defence

Note: In Commercial actions the Statement of Claim must state in clear terms
the material facts upon which the plaintiff relies and above all must show a
clear cause of action, failure to which the action may be struck out, set aside
or dismissed summarily - see Practice Direction rule 1. [Note: Dismissal -
cannot have the action restored, a new action has to be commenced. Set
aside - used to set aside a default judgment. The action can then proceed
normally. Struck out - must make an application to restore the action to the
active cause list.]

As in the General list, the defence must specifically “traverse” (i.e. concede or
rebut each allegation of fact, paragraph by paragraph) every allegation of fact
made in the Statement of Claim. A general or bare denial is not allowed. The
defendant who fails to meet these requirements is deemed to have admitted
the allegation(s) not specifically traversed, and, in an appropriate case, the
plaintiff may be entitled to enter Judgment on admission. [See Kawambwa Tea
Co. (1996) Ltd. v Zygo Bonsai Ltd. SCZ Appeal No. 11 of 2003 - the SCZ upheld
a High Court decision as the defence just made bear denials without
explanations]. 14 Days after the filing of the Memorandum of Appearance and
Defence, a Judge shall summon the parties to a Scheduling Conference.

Directions completely unique to the Commercial List

The commercial list has a “Scheduling Conference” (via notice) at which

orders for direction are given. Thus, 14 days after the Defence has been filed,
the judge will call the parties to a scheduling conference to give them
directions as to how to proceed. If there has been no reply, an order will be
given for when the plaintiff will give the reply. They will decide the time
needed to prepare their cases. Dates will be set for the filing of the bundles
and skeleton arguments and when the status conference will be held. Witness
status.

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Each Statement of claim must clearly state the material facts upon which the plaintiff relies. It must
show a clear cause of action, failing which the statement of claim may be struck out, set aside or the
action may be dismissed summarily

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The Scheduling Conference:
(a) Who should attend? It is important that the lawyers who are personally
seized with the conduct of the case attend the conference, as the
scheduling of events and the directions for the trial ought to be agreed
upon by counsel on both sides and the Judge. Having committed
themselves at the Scheduling Conference, the lawyers will know what
has been agreed upon and will therefore not be expected to advance
any excuses for non-compliance.
(b) What happens at the Scheduling Conference? The aim of the
conference is to chart the course of events in the case. Since all matters
in the Commercial List are judge driven, the judge, in consultation with
the parties gives directions. By agreement the directions will cover:
a. Reply, if any.
b. Defence to counter-claim, if any.
c. Discovery by List as agreed.
d. Inspection.
e. Exchange, and filing, of bundles of pleadings and documents
f. Statements of Witnesses
g. Skeleton arguments and authorities
h. Number of witnesses to be summoned by each party
i. Time required by each party to conduct its case - see PD rule 4
j. Date of the status conference
k. Trail date (although this may be agreed later at the status
conference).

At the scheduling conference, the judge may refer the parties to mediation or
arbitration. The Judge will also consider if the Statement of Claim and Defence
comply with the rules (i.e. clarity, materiality, clear cause of action, specific
traverse of allegations). As stated, the Statement of Claim may be struck pout,
set aside or dismissed or the Defence may be deemed to be an admission and
Judgment entered on admission.

A guide as to the form of witnesses’ statements is found in O.38 rule 2 and

O.38 2A(8) of the Rules of the Supreme Court (RSC) 1999. It is important that
the witness statement be expressed in the first person. It should also state the
following:
1. The full names of the witness
2. His residential or official address, position held and name of employer
3. His occupation
4. That he is a party to the proceedings or an employee

As such a statement shall stand as evidence in Chief at the trial, it should be

treated as if the witness was testifying in the witness box. The Statement
should contain the following features:
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 1. It should be stated in a clear, straightforward narrative form
2. It should follow the chronological sequence of events of the matter dealt
with
3. It should be divided into consecutively numbered paragraphs
4. Dates, sums and numbers must be expressed in figures and not in words
5. It should be typed double spaced
6. It should be paginated
7. Any documents referred to must be clearly identified
8. It must be signed by the witness, unless for good reason which must of
course be stated in a letter attached to the Statement
9. It should contain a statement by the maker that the contents are true to
the best of his/her knowledge and belief.

Assuming the last pleading before the scheduling conference is the defence,
then after the defence is the reply, then there is discovery and exchange of
documents and a date is set for filing the “bundles” and for the “Status
Conference”. At the Status Conference the judge and the parities will
ascertain if the parties are ready and have complied with the orders for
directions given at the Scheduling Conference. I.e. held to see if the orders
made at the scheduling conference have been observed, assess if the parties
are ready and set the date of the trial (if not already done so).

Note: as already mentioned, at the scheduling conference, the parties must

also submit a list of authorities with their skeleton arguments - required at
trial and at all interlocutory proceedings. The parties are also required to give
the amount of time they think their witnesses will take to give evidence.

Note: Interlocutory applications may be made at any time. When making the
application, the applicant shall, together with his application, file a skeleton
argument of his case stating the facts relied upon; the law and citing any
authorities relied upon with copies of such authorities. The respondent is
required to do the same. All interlocutory applications are made to a Judge in
Chambers having conduct of the case and not the Deputy Registrar. In all
interlocutory applications (e.g. application that the plaintiff provided further
and better particulars), the applicant must file with the application, skeleton
arguments, the law (e.g. summons to restore pursuant to O ….. of the HCR)
and cite any authorities relied upon and, where possible, with copies of such
authorities. The respondent is also required to file the same.

Class note: The high court rules have been amended to the extent that other divisions
for the high court for Zambia there is now a scheduling conference and statuts
conference and also a witness statement are now used in all the divisions.

Witness statement:

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Are used because they make the process faster and cheaper because once witness
statements are filed and the matter goes to trial the witness statement is used as
evidence in chief. When you save time you also save money. Read order 38 (2) and
38 (2) (8A) of the white book.
A witness statement should contain all the relevant facts to the claim, defense and
counter claim. In the sequence of things the witness statement is prepared and filed
long after the bunder of documents.

A witness statement must be expressed in the first person. A witness statement is

basically representing what the witness would have said orally in evidence in chief at
trial. some of the things it should have are:

1. Full name
2. Residential address
3.
4. Occupation
5. Name of employers
6. It must also state that the witness is a party to the proceedings or an employee
or an agent to the proceedings

Practice Direction for Commercial List Actions:

Not more than 21 days before the date of trial, the parties must exchange and
file into court statements of witnesses they intend to call (as there is no
examination in chief in the commercial list so as to speed up the trial) - see
Practice Direction rule 3. Not more than 21 days before the date of the trial,
the parties must file skeletal arguments of their case - see Practice Direction
rule 3.

Adjournments
A judge shall not grant an application for an adjournment except in compelling
and exceptional circumstances. PD rule 5 says “Where a party requests an
adjournment, and the Judge, while granting an adjournment is of the view
that the reasons for the adjournment are not very firm, the Judge may, apart
from awarding costs to the opponent, condemn the party requesting the
adjournment to a hearing fee2 to be paid to the Court. Such fee shall be paid
before the matter proceeds.” I.e. these must be paid before the next hearing
date. If the party condemned to pay the court hearing fees is not the applicant
and he fails to pay the fees before the next return date, the applicant shall be
granted his application. If the party condemned to pay the court hearing fees
is the applicant and he fails to pay the fees before the next return date, his
application will be dismissed.

2
Now K 300,000 - up from K 150,000 in 2005.

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In the event that counsel cannot appear in person, counsel can seek an
adjournment through an agent or by notice of motion accompanied by an
affidavit explaining the reasons for non-appearance. No application for an
adjournment by letter will be accepted.

If a Matter is Struck Off

Where an application is struck off for non-appearance by the applicant, an
application to restore will attract a higher fee than is normally paid. Also, if
struck off, you must apply to have the application restored within 30 days. If
not the application stands dismissed. If the matter struck out is restored and
at the hearing the applicant again fails to appear, the judge shall dismiss the
application forthwith.

SUMMONS TO RESTORE
O ….. of the HCR
________________________________________________________________

Finally, if after an action has been filed, 60 days elapse without any progress
being made in the case, the rules state that the action shall be taken to a
judge for dismissal. This makes it necessary for counsel to ensure that
progress is served as quickly as possible. C.f. in the General list where you
have to file an application to dismiss for want of prosecution. Under O 53 rule
13, time determines dismissal in the commercial list.

Practice directions require the applicant to serve process on the other party
and show proof to court of such service by producing as an exhibit a letter of
service enclosing the process that was signed. After service, if no
Memorandum of Appearance accompanied by the Defence is filed and served,
counsel for the plaintiff must file an affidavit of service together with the
acknowledgment of service and the default judgment.

MORTGAGES
A mortgage is a disposition of property as security for a debt. A mortgage can
be created by a demise3 of land, by a transfer of a chattel or by a charge on
any interest in real or personal property for securing money. The security is
redeemed on payment or discharge of the debt.

Characteristics of a mortgage
(a) It is a personal contract for the payment of a debt.
(b) It is a disposition or charge of the mortgagor’s estate or interest as
security for the repayment of the debt.

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Demise - conveyance/transfer of an interest in land.

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Types of Mortgage
Legal mortgage: created by the demise of land or a legal charge 4. It must be
created in writing by a deed. The effect of a legal mortgage by demise is to
vest the legal estate in the term of years created by such demise in the
mortgagee5 who is immediately entitled to possession of the property upon
execution of the deed. The mortgagor’s6 legal estate in the reversion7 of the
term of years is not transferred to the mortgagee until the right of redemption
is destroyed by foreclosure8.

Equitable Mortgage: An equitable mortgage is a contract that creates a

charge on the property but it does not convey any legal estate or interest to
the creditor. As between the mortgagor and mortgagee and so far a equitable
rights and remedies are concerned, an equitable mortgage is equivalent to an
assurance and they are enforced in courts of equitable jurisdiction (i.e. in
Zambia all courts).

As a general rule, all property, real or personal, may be the subject of a legal
mortgage and can also be charged in equity.

How is an Equitable Mortgage Created?

[A] By agreement to create a legal mortgage but this is not put down in a
deed.
[B] By the deposit of title deeds. The deposit of title deeds could even be used
to secure the debt of a third person - third party mortgage - i.e. B lends to L
and P provides his title deeds as security for L’s debt to B. (Note: An equity
may be created by the deposit of title deeds but the deposit of title deeds is
regarded as an “imperfect mortgage”, as third parties are not aware of the
deposit and the mortgage is not registered.)

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Charge - in property law, a charge is a form of security for the payment of a debt or performance of
an obligation, consisting of the right of a creditor to receive payment out of some specific fund or out
of the proceeds of the realisation of specific property. The fund or property is said to be charged with
the debt thus payable out of it.
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Mortgagee - person to whom property is mortgaged, the lender of the mortgage debt.
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Mortgagor - person who mortgages his property as security for the mortgage, the borrower of the
mortgage debt.
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Reversion - where land is granted by the owner for a less estate or interest than he himself has, his
undisposed of interest is terms the reversion as the land will revert to the owner on the
determination of the particular estate.
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Foreclosure - when a mortgagor has failed to pay off the mortgage debt within the proper time the
mortgagee is entitled to bring an action in the Chancery Division by writ or originating summons
asking that a day may be fixed on which the mortgagor is to pay off the debt and that in default of
payment on that day the mortgagor may be foreclosed of his equity of redemption. The court may
make an order for foreclosure nisi for payment of the principal with interest & costs usually within 6
months, failing which an order absolute will be made, land thereupon becoming the property of the
mortgagee.

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Mortgagor’s Equity of Redemption
A mortgagor has the right to redeem the mortgage i.e. pay off the debt and
get back his property. This is the mortgagor’s Equity of Redemption. This right
continues even if the mortgagor fails to pay his debt in accordance with the
provisions for payment/ redemption. This right arises from the transaction
being considered a mere loan of money, secured by a pledge of the estate. For
this reason, any provision in the mortgage deed which tends to prevent
redemption on the payment of the debt or performance of the obligation for
which the security was given is considered to be a “fetter” or “clog” on the
mortgagor’s equity of redemption and is VOID. The mortgagor’s right to
redeem is so inseparable from the mortgagor that it can’t be taken away even
by the express agreement of the parties. [See: Esso Petroleum Co. Ltd. v
Harper’s Garage Ltd. [1967] 1 All ER 699, or [1968] AC, 269]. The mortgagor’s
right of redemption continues until the mortgagor’s title is extinguished or his
interest is destroyed by the sale of the property e.g. pursuant to a court order
to foreclose.

Main Provisions of a Legal Mortgage

Among others a legal mortgage has the following provisions:
(a) A covenant to pay the principal debt and interest on a given date. The
first operative part of a mortgage is usually the covenant by the
mortgagor to pay the principal debt and interest on a particular date.
(b) The next covenant is the covenant to pay interest. The rate of interest
to be paid is usually simple interest but a mortgagor can validly agree
to pay compound interest. The mortgagee can only charge compound
interest if there is agreement with the mortgagor to that effect.
Agreement can be express or implied but a mere intimation by the
mortgagee that he intends to charge compound interest is not enough.
There must be ascent/agreement by the mortgagor that can be
inferred from the nature of the business in which compound interest is
charged. E.g. if the relationship of bank and customer exists between
mortgagee and mortgagor. [See: Union Bank (Z) Ltd. v S. Province
Cooperative and Marketing Union [1995/97] ZLR p. 207]. However,
penal interest in whatever form is forbidden by law e.g. interest on top
of “normal interest” is the mortgagor does not pay on time.
(c) Appointment of a Receiver - every mortgage will have a provision for
the appointment of a receiver or manager if the mortgagor is a limited
Company incorporated under the Companies Act and it is in breach of
its obligation to pay the amount secured by the mortgage (but not if
the borrower is an individual).

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Mortgagee’s Remedies
When the mortgagor defaults the mortgagee is entitled to pursue the
following remedies concurrently:
(i) Payment of the Principal and Interest: This remedy is in accordance
with the mortgagor’s covenant in the mortgage deed to pay the
principal and interest on or after a certain date.
(ii) Possession: The Mortgagee is also entitled to possession of the
mortgaged property. In the case of land that has a dwelling house
on it, the remedy of possession is subject to the limitation that the
court has the discretion to delay the making or enforcement of a
possession order if it considers that the mortgagor is likely to pay
any money due under the mortgage within a reasonable time. The
effect of physical possession is that if the property is on lease, the
mortgagee receives the rent, thus depriving the mortgagor of this
benefit.
(iii) Foreclosure and Sale of the Mortgaged Property: This remedy is
available to the mortgagee after the date for redemption expires. A
power of sale does not include the right to sell to the mortgagee
himself – see Dapontev v Schubert [1939] 3 All ER 495; S. Musonda
(Receiver for the First Merchant Bank Ltd.) v Hyper Food Products
Ltd. and Others SCZ Judgment No. 16 of 1999. The right to foreclose
on a mortgaged property an only be effected by an order of the
court. The mortgagee will first apply for and obtain a foreclosure
order nisi from the court which gives an opportunity to the
mortgagor to redeem the mortgage within a specified period. In
default of payment by the mortgagor, the foreclosure order nisi will
become absolute thereby destroying the mortgagor’s equity of
redemption. [Note: After the sale, the mortgagor must account to
the mortgagee if there is any surplus over the mortgaged amount. If
there is a deficit, the mortgagor can still pursue the mortgagee for
the balance.]
(iv) Appointment of a Receiver (or Manager): A mortgagee may apply
for the appointment of a receiver or manager by the court where
the mortgagor breaches any of its obligations under the mortgage
or if the security is endangered. A receiver may only be appointed if
the mortgagor is a limited company.

Mortgagor’s Remedies
In the appropriate circumstances the mortgagor is entitled to pursue the
following remedies:
(i) Possession: This remedy arises when the mortgagee refuses to
deliver up possession of the mortgaged property after payment and
discharge of the mortgage.

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 (ii) Redemption: This is simply the mortgagor’s right to redeem the
mortgage.
(iii) Surrender or Release: The mortgagor is entitled to this remedy
when a mortgagee refuses to release the security e.g. refuses to
give up the title deeds of the mortgaged property.

Proceedings in the High Court

In a mortgage action, the plaintiff can commence an action either by a writ of
summons or by an originating summons (in chambers on affidavit evidence). A
mortgage action is any action by a mortgagee or mortgagor in which there is a
claim for any of the following reliefs:
(a) Payment of the Money secured by the Mortgage
(b) Sale of the Mortgaged Property
(c) Foreclosure
(d) Delivery of Possession to the Mortgagee by the mortgagor or vice versa
(e) Redemption

An originating summons is appropriate where there is unlikely to be any

substantial dispute of facts, hence the suitability of a mortgage action being
commenced by this process. [File Originating Summons with affidavit and
exhibits]. Mortgage actions are commenced by Originating Summons,
pursuant to Order 30, rule 14 of the HCR.

ORIGINATING SUMMONS
Pursuant to Or 30, rule 14

Debentures (Sister of Mortgage)

A debenture is a document that either creates or acknowledges a debt. In
general, most debentures are securities given by companies. A debenture may
either contain a fixed charge or a floating charge on the company’s
undertakings and property whether real or personal and whether present or
future, as security for a debt.

A Floating Charge: is a charge or security which is not put into immediate

operation but “floats” so that the company is allowed to carry on with its
business i.e. the company will be allowed to use the assets that are secured. It
moves with the property it is intended to effect until some event occurs or
some act is done which causes it to settle and fasten on the subject of the
charge within its reach. [See Illingworth v Houldsworth [1904] AC 355; Amiran
& Others v Agriflora (Z) Ltd. (In receivership) 2004/HPC/0268 (unreported);
and Re: Yorkshire Woolcombers Association Ltd. [1903] 2 CHD 284 where the

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court said “a mortgage or charge by a company, which contains the following
characteristics, is a floating charge:
(1) If it is a charge on a class of assets both present and future,
(2) If that class is one which, in the ordinary course of business of the
company will be changing from time to time;
(3) If it is contemplated by the charge that, until some future step is taken
by or on behalf of the mortgagee, the company may carry on its
business in the ordinary way so far as concerns the particular class of
asset so charged.”

In Illingworth v Houldsworth [1904] that is discussed in The Attorney General v

Zambia Sugar Co. and Nakambala Estates Ltd. [1977], Lord MacNaghten
described a floating charge at p. 254 as being “ambulatory and shifting in its
nature, hovering over and so to speak floating with the property which it is
intended to affect until some event occurs which causes it to settle and fasten
on the subject of the charge within its reach and grasp.”

A floating charge remains dormant until the undertaking charged ceases to be

a going concern or until the person in whose favour the charge is created,
intervenes e.g. when a receiver is appointed or the debtor defaults. Then the
floating charge will “crystallise” into a fixed charge. As regards crystallization,
Gower’s Principles of Modern Company Law, 6 th Edition, p. 367 states “a
crystallised charge will bite on all the assets covered by the charge since
normally a floating charge does not provide for crystallization over part only of
the assets to which it relates. The effect of the crystallization is to deprive the
company of the autonomy to deal with the assets subject to the charge in the
normal course of business”.

A Specific or Fixed Charge

A specific or fixed charge on the other hand is fastened on ascertained or
definite property or property capable of being ascertained and defined. It
prevents the company from disposing of the property without the consent of
the holder of the charge (which will not usually be given!!). [Note: In a
debenture, there may be both fixed and floating charges that act as security
for the loan.]

Effect of a Floating Charge

As a floating charge is only a charge on the assets for the time being, a
company can, in the course of ordinary business, sell, mortgage, or otherwise
deal with any of its asserts as if the floating charge had not been created, until
the security becomes fixed

Restrictions on a Floating Charge

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The operation of a floating charge is usually restrict6ed by a provision in the
debenture that the company shall not create a mortgage or charge on any of
the assets, ranking in priority to, or parri passu9 with, the charge given by the
debenture.

A floating charge becomes a fixed charge in the flowing situations:

(i) If the company ceases to do business i.e. it stops trading (but may
still exist as an entity);
(ii) If the company is wound up i.e. it “dies”;
(iii) If a receiver is appointed;
(iv) If some event happens upon which the charge the charge is to
become a fixed charge and notice to that effect is given pursuant to
the terms of the charge e.g. in the debenture creating it.

When a floating charge becomes a fixed charge, a company cannot thereafter

deal with any part of the property so charged, except subject to the charge
See: Government’s Stock & Securities Investments Co v Manila Railway Co
[1897] AC 81 and Gower’s Principles of Modern Company Law 6 th Edition page
367 which states:

“A crystallised charge will bite on all the assets covered by the charge
since a floating charge does not normally provide for crystallization over
a part only of the assets to which it relates. The effect of the
crystallization is to deprive the company of the authority to deal with the
assets subject to the charge in the normal course of business”.

Guarantees
In certain situations, security for a loan may be provided by a surety under
a contract of guarantee. A guarantee is a contract by which the promissor
i.e. the guarantor or surety, undertakes to be answerable to the promisee
or creditor for the debt or default of another party who is called the
principal debtor or borrower. A guarantee is usually referred to as a
collateral contract and is different from an original contract between the
creditor and the borrower. A guarantor is discharged if the principal
debtor performs the obligation guaranteed, i.e. he pays the debt.

The Nature of a Guarantee

An agreement will not be a guarantee unless there is in existence or
contemplation a principal debtor and a secondary debtor (i.e. the
guarantor). Unless the guarantee provides to the contrary, it will be
determined (a) if the principal obligation is changed without the

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They are at par, they are the same or equal

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guarantor’s consent or (b) if the principle obligation i.e. the obligation to
pay is itself discharged.

Offeree (Creditor)     Borrower

Offeror (Guarantor)10

The Essentials of a Guarantee

(i) There must be a valid agreement i.e. an offer, which receives an
unqualified acceptance from the person to whom it is made.
(ii) To amount to a guarantee, the offer must be addressed to the
creditor. Thus an offer that is not addressed to any individual
creditor to contribute to the debtor’s liability, is not a
guarantee.
(iii) There must be a debt owed by a party to another that has to be
guaranteed.

Form of Contract of a Guarantee

(i) A guarantee must be in writing and signed by the guarantor or
some other person lawfully authorized by him [It is a deed as no
consideration is paid for the contract - Statute of Frauds]
(ii) The requirement of writing will be satisfied by any sufficient
note or memorandum of the promise of guarantee signed by
the guarantor of his agent. [In practice banks has standard
forms/documents.]

Guarantor’s Liability
There are two kinds of Guarantors Liability:

1st: A promise by the guarantor that becomes effective if the principal

debtor fails to perform his obligation.

2nd: A promise that the principal debtor will perform his obligations to the
creditor.

In both situations, the guarantor’s liability is secondary as he has no

liability if the liability of the principal debtor is discharged. It follows
therefore that before the principal debtor has committed any default, the
creditors cannot bring an action against the guarantor to force him to set
aside money to provide for the possibility of a debt becoming due from
the principal debtor and the principal debtor being in default. In summary,
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Usually the directors or main shareholders of the company become personally liable for the
borrowing of their company as the principle debtor.

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unless the borrower defaults, the creditor cannot sue as the guarantor’s
liability a\only arises when the principal debtor is in default and not until
then.

Enforcement of a Guarantor’s Liability

A creditor can enforce the remedy against the guarantor on his guarantee
by bringing an action in court. The principal debtor may or may not be
sued in the same action, but the creditor usually sues both.

Guarantor’s Rights After Payment

Unless the guarantor has waived his rights he is entitled to be subrogated to
all the rights possessed by the creditor in respect of the debt as soon as he has
paid the creditor the debt due to him by the principal debtor. If the
guaranteed debt is secured by a mortgage executed by the principal debtor,
the guarantee is, on payment of the debt, entitled to a transfer of it, so
becoming the mortgagee, even if not aware of their existence.

AGENCY
An agent is a person who negotiates and concludes commercial/business
transactions on behalf of another called the principal. E.g. insurance brokers,
estate agents, auctioneers, travel agents. It is an established principle of law
that a person cannot acquire rights or duties under a contract unless he/she is
a party to that contract (privity of contract). However, if a contract is
concluded by an agent on behalf of his principal, the acts of the agent are
treated as if they are the acts of his principal. I.e. the principal steps into the
shoes of his agent and becomes a party to the contract through his agent. In
law, agents are recognized as having the power to affect the legal rights,
liabilities and relationships of the principal. In Cavmont Merchant Bank v
Amaka Agricultural Holdings SCZ Judgment No. 12 of 2001, the SCZ held that
where an agent in making the contract discloses both the interest and the
names of the principal on whose behalf he purports to make a contract, the
agent as a general rule is not liable to the other contracting party.

Apart form having the power to affect the legal rights, liabilities and
relationships of the principal, the agent may also affect the legal position of
his principal in other ways. E.g. he may dispose of the principal’ property in
order to transfer ownership to a third party or he may acquire property on his
principal’s behalf. Sometimes the actions of the agent may make the principal
criminally liable [see Gardener v Ackeroyd [1952] 2 QB 743 or 2 All ER 306].
The law recognizes the following as agents even though they do not bear the
title of agent:
(a) Company Directors and other company officials - being an artificial person,
a company has to act through human agents. Then authority to act as
company agents is vested in the board of directors. This authority may be
14
 delegated to one or more executive directors by the articles of the
company to allow him to manage the day-to-day operations of the
company.
(b) Partnerships - as a partnership has no separate legal identity from its
members, every partner in a firm is an agent of the firm as well as all other
partners for the purpose of the business of the firm. Thus, a partner who
performs an act for the purpose of carrying out the business of the firm,
binds the firm as well as the other partners.
(c) Employees - may be servants working under a contract of service or an
independent contractor working under a contract for services. An
employee e.g. a shop assistant is the agent of the shop owner for the
purposes of making a contract of sale for the owner. He has the authority
to make statements about goods that are binding on the shop owner, his
employer.
(d) Professionals - acting on behalf of clients may be the agents of those
clients. E.g. a lawyer conducting litigation is his client’s agent and may have
authority to settle the case and that settlement will bind the client. Thus
the lawyer, not the client, normally signs a consent judgment. Similarly, an
accountant’s agreement or statement to ZRA will bind his client in
accordance with agency principles.

Power and Authority of an Agent

The law recognizes that an agent has the power to bind his principal in the
following situations:
(a) Where the principal gives prior consent the agent’s actions - here the
agent has actual authority.
(b) Where the agent acts without the principal’s consent but the principal is
estopped from denying the agent’s authority - here agent has apparent
authority.
(c) Where the agent acts without the principal’s prior consent but the
principal gives retrospective consent by way of ratification.
(d) Where the agent acts without the principal’s consent but the law deems
that the principal has consented e.g. agents of necessity (e.g. truck driver
sells perishable goods when his truck breaks down).

As the relationship between the agent and his principal is based on consent,
actual authority is of paramount importance. An agent is only entitled to be
paid if he acts within his actual authority. If he acts outside his authority he
may be liable to his principal. The relationship between the principal and a
third party depends on the agent’s power to bind his principal. However, what
is of concern to the third party is the agent’s apparent authority as this is what
he relies on in the ordinary course of events. The distinction between actual
and apparent authority was explained by Diplock L.J. in Freeman & Lockyer v.
Buckhurst Park Properties [1967] 2 QB 480.
15
Types of Authority of An Agent
[A] Express Authority - the agreement between a principal and agent may be
express or implied. Express agreement may be made orally, in writing or by
deed. In general, if an agent is appointed to execute a deed his appointment is
by deed called a power of attorney.
[B] Implied Authority - arises where, although a particular action is not
sanctioned by express agreement between the principal and the agent, the
principal is nevertheless taken to have impliedly consented to the action or
transaction in question. In Garnac Grain Co. v. H.M.F. Faure and Fairclough
[1967] 2 All ER 353 the House of Lords stated at p. 358 “The relationship of
principal and agent can only be established by the consent of the principal and
agent. They will be taken to have consented if they have agreed to what
amounts at law as a relationship even if they do not recognize it themselves
and even if they have professed to disclaim it. An agent who has express
authority to carry out a particular task may also have additional authority to
do certain acts incidental to his authorized task For instance, an agent
authorized to sell the principal’s property has implied incidental authority to
sign a contract of sale.”
[C] Apparent Authority - a person may be bound by the acts of another done
on his behalf without his consent or even in breach of an express prohibition if
his words or conduct create the impression that he has authorized the other
person to act on his behalf. This is described at law as “apparent agency or
authority” or “ostensible agency or authority”. Apparent authority can be
inferred in the following situations:
(a) X is appointed to act as Y’s Managing Director, but Y expressly places a
limitation on X in that he can only enter into a contract with a third party
worth more than K 50m if he first gets the approval of the Board of
directors. X then orders goods worth K 100m from a third party who is
unaware of the limitation of X’s actual authority. Here, X has apparent
authority to buy the goods and Y is bound by the contract.
(b) X is appointed to act as Y’s agent but his agency is terminated. Thereafter X
continues to act and enters into a contract with a third parry who is
unaware of the termination. Y is bound as the principal. [See: Drew v Nunn
[1879] 4 QBD 661].
(c) X is never appointed to act as an agent but Y allows him to act as if he
were or leads a third party to believe that X is Y’s agent. Y will be bound to
a third party in transactions entered into by X on his behalf and within the
scope of his agency.
[D] Agents of Necessity - A person who acts in an emergency e.g. to preserve
the property or interest of another may be treated as an agent of necessity.
His actions will be deemed to have been authorized even if no actual authority
is given. Like apparent authority, an agency of necessity can arise even in the
absence of consent from the principal. Note: an agency of necessity only
16
arises in extreme circumstances where there is actual and definite commercial
necessity for the agent’s actions. The following must be satisfied for an agency
of necessity to exist:
(a) There must be an emergency - something unforeseen.
(b) It must be practically impossible to get instructions fro the principal.
(c) The agent must act bona fide in the interest of the principal rather than
to advance his own interests. He must not take advantage of the
principal.
(d) The agent must act reasonably in the circumstances.
An agency is common in a situation of carriage of goods by sea. It is universally
accepted that a caption of a ship may take such action in relation to the ship,
and/or its cargo in an emergency, as he deems appropriate for the purpose of
preservation. He may e.g. sell or pledge the cargo to raise capital to repair the
ship or he may incur expenses on behalf of the owners in order to preserve
the cargo. He may also throw overboard (jettison) part of the cargo in the case
of extreme danger in order to lighten the ship. In respect of perishable goods
or livestock, an agent of necessity may also apply to cases of goods carried by
land. Agency of necessity creates privity of contract between the principal and
the third party e.g. when the agent arranges d\for a third party to store the
goods of the principal. An agent can also rely on the necessity either to
provide him with a defence to a claim from the principal for wrongful
interference with his property or as a basis for claiming expenses that he has
incurred in preserving the principal’s property.
[E] Agency arising out of Co-habitation - It is argued that a wife has authority
to pledge the credit of her husband for necessities (or vice versa). This is
inaccurate for two reasons:
(a) The rule applies also to non-married couples who are cohabiting as
there is a presumption f marriage creates by the cohabitation.
(b) Cohabitation does not give rise to authority but to a rebuttable
presumption that the husband gave his wife such authority. The
husband can deny he gave authority to the wife by rebutting the
presumption by showing:
a. The wife is adequately supplied with necessities.
b. The wife is provided with an adequate allowance
c. The wife has been forbidden to pledge his credit.

However, others argue that social conditions now make it old fashioned to
suggest that actual or apparent authority should not arise between husband
and wife.
[F] Ratification of Agent’s Actions - Notwithstanding the absence of the
agent’s actual or apparent authority, a principal can nevertheless adopt the
agent’s acts done in his name without his authority by ratifying them, unless
the acts ore to his detriment. The requirements for effective ratification are:

17
 (a) The principal can only ratify acts done in his name i.e. the agent must
have purported to have authority and not to have acted in his own
name. See Watteau v. Fenwick [1893] 1 QB 346; Keighley Maxted and
Co. v. Durant [1901] AC 240.
(b) The principal must have been in existence at the time of the agent’s
actions done on his behalf. This requirement may cause problems for
promoters of companies who enter into contracts before the company
is incorporated and they cannot be ratified after incorporation.
Promoters making pre-incorporation contracts are personally liable
unless there is agreement to the effect that the company, once
incorporated, shall be substituted for the promoters.
(c) The principal can only ratify a contract/transaction if he is competent
to make it at the time of the agent’s actions and at the time of
ratification. E.g. a minor cannot effectively ratify a contract after
attaining majority if the contract would not have bound him when he
was a minor. Similarly a company cannot ratify a contract that is ultra
vires its articles of association.

Effect of Ratification
When a principal ratifies a contract made in his own name, the effect is as if
the agent had been authorized at the time of his actions. Therefore, if the
agent made a contract with a third party on behalf of the principal, a privity of
contract will exist between the third party and the principal. At the same time
the relationship of principal and agent will also exist. When the principal
ratifies the agent’s actions, the agent is not liable for exceeding his authority
and may be entitled to the rights of an agent (e.g. remuneration). Similarly, a
third party cannot have a claim against the agent for breach of warranty of
authority. Ratification may also have retroactive effect on the third party in
that if he makes an offer to the agent that the agent accepts on behalf of the
principal who subsequently ratifies it, the third party is bound, even if he
purports to withdraw his offer before ratification. See: Bolton Partners v
Lambert [1889] 41 Ch D 295. ratification will only be effective if it takes place
within a reasonable time. Ratification will not be effective where third parties
have acquired property rights, which would be adversely affected by
ratification.

Method of Ratification
A principal may expressly or impliedly ratify an agent’s actions. He may
impliedly do so by any act that unequivocally shows his intention to ratify e.g.
if he starts legal proceedings to enforce the contract with a third party which
the agent entered into on his behalf. See: Bedford Insurance Co. Ltd v.
Instituto de Resseguros do Brasil [1985] QB 966; [1984] 3 All ER 766.

Duties of An Agent
18
Whether there is a contract between the principal or not, the law imposes a
number of duties on an agent.
(a) Duty to Obey Instructions - An agent is under a general duty to obey
his principal’s instructions. He is contractually obliged to perform the
duties he has undertaken to do under the contract and if he breaches
or fails to perform these obligations, he is liable for breach of contract.
A contractual agent is under a duty to obey the instructions of his
principal given in during the course of agency, but is not obliged to
obey instructions which require him to act illegally. Moreover, the duty
of a professional agent to obey instructions may also be limited by the
rules of professional conduct. The agent’s duty of obedience also
means he must not exceed his authority and this applies to both
contractual and gratuitous agencies.
(b) Duty to Exercise Reasonable Care: An agent owes his principal the duty
of reasonable care in executing his authority. The standard of care
required is what is reasonable in the circumstances and this will
depend o the facts of each case. If an agent holds himself out to be a
member of a profession, he will be expected to show the standard of
skill and care expected of a reasonably competent member of that
profession [Note a SC will be expected to show and have higher
competence than a newly qualified legal practitioner]. Also it is an
established principle of law that even a gratuitous agent owes a duty of
reasonable skill and care to the principal. E.g. Chaudhry v. Probhakar
[1988] 3 All ER 718; [1989] 1 WLR 29, CA. – the principal, who had
recently passed her driving test, wanted to buy a car and being
inexperienced asked the agent, a friend, to find a suitable car and
specified that it should not have been involved in an accident. The
agent, who was not a mechanic, and acted gratuitously, found and
recommended a one year old VW Golf car being sold by a firm of panel
beaters and paint sprayers. The principal bought the car but later
discovered that it had been badly damaged in an accident. She sued
and the agent sought to rely on old cases as to the standard of care of
gratuitous agents. He Court of Appeal held that the standard of care of
any agent is such as is reasonable in all the circumstances. In deciding
what care is reasonable, the court will take into account the fact if the
agent was paid or not, the degree of skill possessed or claimed by the
agent, and the degree of reliance placed on the agent by the principal.
On the facts of this case, the agent had failed to exercise reasonable
skill and was held to be liable.
(c) Agent’s Fiduciary Duties: An agent has extensive powers to affect the
principal’s legal position and the principal must place trust in the agent.
Thus the law regards the relationship between the agent and his
principal as being one of a fiduciary nature and therefore imposes
certain obligations on the agent so that the principal can be protected
19
against abuse of a agent’s powers to bind him to a third party. These
duties can be equated to those of trustees and directors of a company.
Fiduciary duties are:
a. Duty to avoid Conflict of Interest - a rule of universal application
is that a person who has fiduciary duties to perform shall not be
allowed to enter into engagements in which he has/can have
conflicting personal interests or interests which may conflict
with the interests of his principal. Arid\sing from this rule, an
agent instructed by his principal to but property but sells his
own property to the principal will be in breach of his fiduciary
duty. See: Lucifero v Castel [1887] 3 Times LR 371 - an agent
appointed to buy a yacht bought it himself and then resold it to
the principal for a profit. Agent had to pay the profit to the
principal. Similarly, an agent instructed to sell the principal’s
property and buys it himself will also be in breach of his fiduciary
duty as in both situations there is the obvious potential for
conflict of interest as the seller’s interest is to get the highest
possible price while that of the buyer is to pay as little as
possible. Whether the agent acted fairly and paid a fair price is
immaterial and is in breach of his fiduciary duty unless there is
full disclosure to he principal of all the relevant facts and the
principal consents to the transaction. The duty to avoid conflict
of interest may continue even after the end of the agency if a
confidential relationship is created by the agency continues or if
it gives the agent a special position of dominance over the
principal and the transaction is connected with that relationship.
See: McMaster v Byrne [1952] 1 All ER 1362. Also the decision in
McPherson v Watt [1873] 3 AC 254 demonstrates that an agent
will still be in breach of duty even if he deals with the principal
through a third party. Here the agent was instructed to sell
property but arranged for his brother to buy it for him. When
the principal discovered, he refused to complete and the court
refused to order specific performance because of the agent’s
breach of duty. Where an agent deals with his principal in
breach of this duty, the principal may rescind the contract. Many
professional associations have enshrined rules against conflict of
interest in their codes of conduct e.g. lawyers, accountants.
b. Duty not to make a secret profit - an agent is under a duty not
to make a secret profit out of the transactions that he enters
into on behalf of his principal. It is irrelevant that the agent
acted in good faith or that the principal suffered no loss or that
the agent made a profit that the principal could not have made
or that the principal actually benefited from the agent’s actions.
The liability arises from the mere fact the profit was made. See:
20
 Phipps v Boardman [1964] 1 WLR 993. Note: this duty also
applies to unpaid or gratuitous agents. An agent who makes a
profit will be in breach of the duty unless all of the
circumstances are disclosed to the principal and the principal
consents to the agent retaining the profit. Where the duty is
breached by the agent he may be required by the principal to
account for the secret profit.
c. Duty not to take a bribe - a bribe is a form of secret profit.
Where an agent deals with a third party on the principal’s
behalf, a bribe is any payment made by the third party to the
agent, the third party knowing that the agent is the agent off the
principal and the payment is kept secret from the principal. See:
Industries and General Mortgage Co. Ltd. v Lewis [1949] 2 All ER
573. When an agent makes a secret profit, the principal has
recourse to the following remedies:
i. To dismiss the agent without notice.
ii. Refuse to pay any commission due to the agent or
recover commission paid to the agent prior to the
discovery of the bribe.
iii. The principal may rescind the contract with the third
party.
iv. The principal may claim the money i.e. the bribe from
either the third party or the agent.

In addition, a bribe can also give rise to criminal liability under

the Corrupt Practices Act.
d. Duty to Account - In the same way that an agent may not make
a secret profit from the use of the principal’s property, an agent
is also under a duty to keep his own property separate from that
of his principal. An agent who receives money for the principal
must pay it to the principal once it is demanded. The agent must
also keep full and accurate books of account for all transactions
entered into on behalf of the principal. When the agency is
terminated, the agent must deliver up to the principal any
books, accounts, and other documents given to him by the
principal or which were prepared for use in the course of the
agency relationship unless he is entitled to exercise a lien over
them e.g. if he has not been paid.

Termination of Agency
The relationship between principal and agent depends on consent. If
withdrawn, the agency will automatically end, as well as the agent’s actual
authority to bind the principal. An agency relationship may be terminated in
the following ways:
21
 (a) By mutual consent between the agent and the principal.
(b) By either party unilaterally withdrawing consent.
(c) An agent may have been appointed for a fixed period of time or for a
specific task or set of tasks. Once the time elapses or the task(s) is/are
completed the agency will terminate.
(d) By operation of law e.g. if the performance of the agency relationship
becomes illegal (e.g. one party becomes the citizen of an alien enemy)
or impossible (where it will be ended by the agency contract being
frustrated). Death of either party will also terminate the agency and
any contract made between them. If an agent becomes insane, the
relationship is automatically terminated. The bankruptcy of either the
agent or the principal will also end the agency.

The Effect of Termination vis a vis Third Parties

The agent may continue to have apparent authority even if actual authority
has been terminated. If the principal’s conduct is such as to suggest to a third
party that the agent continues to have authority. Until the principal brings the
termination of the agent’s authority to the notice of a third party, the agent
may continue to have apparent authority on the strength of the principal’s
representation. See: Drew V Nunn [1879] 4 QB 661. Here the principal became
insane but his wife, who was his agent, continued to act in his name. When he
recovered from his insanity he tried to disclaim liability for acts done by his
wife during his insanity/incapacity. Held: The agent i.e. his wife, had apparent
authority and therefore he was bound. However, where an agent’s actual
authority is terminated by the principal’s death or bankruptcy the agent will
automatically cease to have apparent authority.

If an agent continues to act after his authority has been terminated, he may
incur personal liability for breach of implied warranty of authority. Sometimes
an agent may suffer a potential risk when his authority is terminated
automatically without his knowledge. See: Yonge v Toynbee [1910] 1 KB 215
where solicitors were acting in a litigation for a client who, unknown to them,
became mentally incapacitated so that the agency was considered to be
terminated. However, they continued to litigate for the client and were held
liable for their breach of warrant of authority and were ordered to pay the
costs of the other litigant.

Power of Attorney (POA)

One of the situations where the law recognizes an agent as having powers to
bind his principal is when the principal gives prior consent to the agent’s
actions so that the agent has actual authority. A typical example of actual
authority is a POA. A POA is defined as an instrument in writing where one
person called the principal appoints another (his agent) and confers authority
to perform certain specific acts or kinds of acts on behalf of the principal. It is
22
an instrument authorizing another to act as one’s agent or attorney (Black’s
Law Dictionary, 6th Edition) Note: the principal is the donor of the power and
the agent is the donee.

Capacity to Create a Power of Attorney

The rules relating to the capacity to appoint an attorney are the same as those
pertaining to capacity to enter into a contract. The general rule of contractual
capacity is that the person concerned must be capable of understanding the
nature and effect of the contract at the time he enters into it. For minors, the
modern view is that whenever a minor can lawfully do an act on his own
behalf so as to bind himself, he can instead appoint an agent to do it for him.
See G.(A) v G.(T) [1970] 2 QB 643; [1970] 3 All ER 546. It has been suggested
that a POA is regarded as a contract of service and is therefore binding on a
minor if it is for his benefit.

As for persons suffering from mental disorder, the law is that a POA executed
by a person incapable through mental incapacity of understanding what is to
be effected by executing the deed is invalid. A purported grant is also invalid
and anything done on its strength is void. For this reason it is immaterial that
neither the attorney nor the third party was aware of the donor’s mental
capacity.

In relation to a company, its Board of Directors may by resolution appoint an

attorney to execute on its behalf any agreement or other instrument that is
not a deed in relation to any matter that falls within the company’s powers.

Formalities for Creating a Power of Attorney

It is necessary that an instrument creating a POA must be executed as a deed
by the donor of the power and a witness must attest his execution of the
deed. Alternatively, another person may sign the deed on behalf of the donor
if done so at his direction and in his presence and in the presence of TWO
witnesses. This alternative method may be used where the donor is unable to
sign personally. There is no mandatory requirement to register a POA in the
High Court Registry or the Lands and Deeds Registry. In practice however, it is
not uncommon to do so, more especially in the Lands and Deeds Registry, and
especially where the POA is given to sell the donor’s real property. [POA must
be in the lodgment schedule].

Duties of an Attorney
These are similar to those of a trustee and include:
(a) To act in accordance with the terms of his authority
(b) To act in the name of the donor.
(c) Not to exceed his authority.
(d) To act with due care and skill.
23
 (e) Not to delegate his office. [Anderson Security Systems v Albert Risky
Masuka SCZ Appeal No. 3 of 2002]
(f) Not to put himself in a position where his duties as an attorney conflict
with his own personal interest or the interest of third parties.
(g) Not to take advantage of his position to obtain a benefit for himself.
(h) Not to accept any secret commission (bribe)
(i) To keep his donor’s money/property separate from his own.
(j) To account to the donor.

A POA is strictly interpreted by the courts as giving only that authority which it
expressly confers or such authority as is necessarily implied e.g. to get State’s
Consent if asked to sell land. See Bryant Powis and Bryant Ltd. v La Bank Du
Peuple [1893] AC 170, esp p. 177] An ordinary POA is also construed so as to
include all incidental powers needed for its effective execution. Where it
contains a list of specific acts followed by general words, the general words
are construed as being the same kind as the specific acts [Ejusdem Generis
Rule]. If a donor wishes to exclude this rule he should expressly state so in the
POA. Where operative words are clear, such words will prevail over any
recitals but if they are ambiguous they may be controlled by the recitals. See:
Damby v Coults and Co. [1885] 29 ChD 500.

Remuneration
An attorney, like an agent, is only entitled to be remunerated for his services if
the terms of his appointment expressly or impliedly provide for it. If the terms
are not express he may apply for remuneration on a quantum meruit basis, if
the understanding was that he would be remunerated. Even if POA does not
expressly provide for remuneration, the attorney is still entitled to be
indemnified by the donor in respect of costs/expenses incurred by him in the
course of carrying out his functions. To avoid doubt it is advisable to include a
clause in the POA expressly stating whether the attorney shall be
remunerated or not.

Attorney’s Protection
If an attorney purports to act under a POA that has been revoked he is liable
for any loss incurred by the donor and any third party. However, if the
attorney did not know of the revocation of his power he will not incur any
liability either to the donor or to a third party but to escape liability the
act/transaction must be one that would have been authorised but for the
revocation.

Protection of Third Parties

If a third party deals with an attorney when his power has been revoked but
the third party had no knowledge of the revocation, the transaction between
him and the attorney is as valid as if the power had not been revoked.
24
Revocation of POA
A POA may be revoked as follows:
(a) By express revocation - in writing to the attorney.
(b) By implied revocation e.g. donor does anything that is inconsistent with
the continued operation of the power.
(c) By the donor’s death.
(d) By the donor’s bankruptcy
(e) By the donor’s mental incapacity, unless the power is “enduring” see
below.
(f) By the winding up/dissolution of a corporate donor
(g) By the attorney’s death if he is a sole attorney or one appointed to act
jointly with others.
(h) By the attorney’s bankruptcy if he is a sole attorney or one appointed
to act jointly with others.
(i) By the attorney’s mental incapacity.
(j) By the winding up of a corporate attorney
(k) By the effluxion of time
(l) By the fulfillment of the purpose for which the power was granted.
(m) By the frustration of the purpose for which the power was
granted.
(n) By any event that renders the agency or is objects illegal.

In certain circumstances, an ordinary POA may be irrevocable by the donor

e.g. where the POA is expressed to be irrevocable and is given to secure either
a proprietary interest of the attorney or the performance of an obligation to
the attorney as long as the interest or obligation remains undischarged. The
power cannot be revoked unless the attorney consents. Similarly, the power
cannot be revoked by the death, incapacity bankruptcy of the donor or its
winding up if the donor is a body corporate. An attorney may disclaim the
power and cease to exercise such power whether the disclaimer is effected by
deed or conduct. It is important that the attorney give notice of such
disclaimer to the donor as soon as possible.

Types of POA
First
(a) General POA - gives an attorney full or general powers to act in many
transactions on behalf of the donor i.e. the attorney is given wide
powers over many issues.
(b) Specific POA - gives an attorney authority to perform a specific act e.g.
sell the donor’s property, and he cannot do anything else.
Second:
(a) Ordinary POA - automatically revoked by the intervening mental
incapacity of the donor

25
 (b) Enduring POA - continues to subsist - given normally to secure either a
proprietary interest of the attorney or the performance of an obligation
owed to the attorney by the donor.

Checklist for Preparing a POA

When getting instructions to draw up a POA:
(a) Ascertain if your client is the donor or the intended attorney and if
there is, or is likely to be, a conflict of interest in acting for both donor
and attorney.
(b) Ascertain the need for a POA - is there a need for an ordinary POA,
specific or enduring POA.
(c) Ascertain the donor’s capacity to create a POA. Probe the donor to see
if he/she understands that by POA, the attorney assumes full control
over his property and affairs and he can do anything with them that the
donor could do personally. If acting for the donor, explain this.
(d) Probe the suitability of the proposed attorney. Be satisfied that the
intended attorney is trustworthy and reliable. Probe the donor about
why he is giving attorney such wide powers over his affairs. Be satisfied
that the intended attorney has the mental capacity to have POA.

HIRE PURCHASE
Hire Purchase is a form of consumer credit. In Zambia, the Hire Purchase Act,
Cap. 399 of the Laws of Zambia, governs hire purchase agreements. Section 2 -
defines Hire Purchase as follows:

"hire-purchase agreement" means-

(a) Any contract whereby goods are sold subject to the condition that
notwithstanding delivery of the goods the ownership in such goods
shall not pass except in terms of the contract and the purchase price is
to be paid in two or more instalments;
(b) Any contract which provides for the hiring of goods whereby the hirer
has the right-
(i) To purchase such goods after two or more instalments have
been paid in respect thereof; or
(ii) after two or more instalments have been paid in respect thereof,
to continue or renew from time to time such hiring at a nominal
rental, or to continue or renew from time to time the right to be
in possession of the goods, without any further payment or
against payment of a nominal amount periodically or otherwise;

whether or not the agreement may at any time be terminated

by either party or one of the parties;
26
 (c) Any other contract which has, or contracts which together have, the
same import as either or both the contracts defined in paragraph (a) or
(b) of this definition, whatever form such contract or contracts may
take;

In terms of form and content of a HP agreement, section 5(1) states:

5. (1) Every agreement shall-
(a) Be reduced to writing and signed by or on behalf of all the
parties to the agreement;
(b) Contain a statement of the cash price.

S.5 (2) spells out the consequences if the requirements in s.5 (1) are not
compiled with as follows:

5.(2) If an agreement does not comply with the provisions of subsection (1)
(a) The goods which are the subject of the agreement shall be deemed
to have been sold to the purchaser
(i) without any reservation as to the ownership of the goods or,
as the case may be, without any stipulation as to the seller's
right to the return of the goods; and
(ii) on credit at a price, payable in the same manner as that
stipulated in the agreement, which is twenty-five per centum
less than the purchase price; and

(c) The seller shall not be entitled to enforce any contract of suretyship,
indemnity or guarantee relating to the agreement except, in the case of
an agreement which has been the subject of a cession or assignment,
against a surety or guarantor who was the original seller under the
agreement:

Provided that if, in any action arising out of the agreement, the court is
satisfied that the purchaser would not, but for the provisions of this
subsection, have been prejudiced by the fact that the agreement does not
comply with the provisions of subsection (1), the court may, subject to
such conditions that it thinks just and equitable to impose, order the
parties to carry out the terms of the agreement as if the agreement had
complied with the provisions of subsection (1).

Further section 7 states that the HP agreement must also contain the
following information:

S.7. (1) Every agreement shall set out

(a) (i) the amount of the purchase price of the goods;
27
 (ii) the amount paid or to be paid by the purchaser under the
provisions of paragraph (a) of subsection (1) of section twenty-five;

(iii) the amount of each of the instalments by which the purchase

price is to be paid;
(iv) the mode of payment of such instalments;
(v) the date or mode of determining the date on which each
instalment is payable; and
(vi) the rate of interest, which shall not exceed the maximum rate of
interest referred to in subsection (2) of section eight, chargeable upon
an instalment in arrear;
(b) a description of the goods let, sold or delivered under the agreement
and of any goods delivered to the seller under the provisions of paragraph (a)
of subsection (1) of section twenty-five which is sufficient to identify them;
(c) the terms as to the reservation and passing of ownership of the goods
or as to the seller's right to the return of the goods, as the case may be.

(2) No seller shall, on or after the third anniversary of the commencement of

this Act, use any form of agreement the provisions of which, whatever their
nature, are not set out in clearly legible printed or typed letters of
substantially the same size.

(3) If an agreement does not comply with the provisions of subsection (1) or,
on or after the 8th March, 1960, with the provisions of subsection (2)-
(a) The goods which are the subject of the agreement shall be deemed to have
been sold to the purchaser-
(i) without any reservation as to the ownership of the goods or, as the
case may be, without any stipulation as to the seller's right to the
return of the goods; and
(ii) on credit at a price, payable in the same manner as that stipulated
in the agreement, which is twenty-five per centum less than the
purchase price; and

(b) The seller shall not be entitled to enforce any contract of suretyship,
indemnity or guarantee relating to the agreement except, in the case of an
agreement which has been the subject of a cession or assignment, against a
surety or guarantor who was the original seller under the agreement:

Provided that if, in any action arising out of the agreement, the court is
satisfied that the purchaser would not, but for the provisions of this
subsection, have been prejudiced by the fact that the agreement does not
comply with the provisions of subsection (1), the court may, subject to such
conditions that it thinks just and equitable to impose, order the parties to

28
carry out the terms of the agreement as if the agreement had complied with
the provisions of subsection (1)

Nature of a Hire Purchase Contract

At common law, hire purchase applies only to contracts of hire that confer an
option to purchase. It is generally used to describe contracts that are
agreements for the purchase of chattels with the proviso that property in the
goods will not pass to the purchaser until all instalments have been paid.
Under a contract to purchase by instalments, there is a binding obligation on
the part of the purchaser to buy the chattel and he can therefore pass good
title to a purchaser or pledgee who deals with him in good faith and without
notice of the rights of the true owner. In the case of a contract that merely
confers an option to purchase, there is no binding obligation on the part of
the hirer to buy and a purchaser or pledgee can obtain no better title that the
hirer had.

Formation of a Hire Purchase Agreement

Only two parties are necessary for a hire purchase agreement - the owner of
the chattels and the hirer of the chattels. On the capacity to enter a HP
agreement, this depends on the ordinary common law rules that an individual
must have capacity to contract. In most cases a HP transaction is financed by a
third party e.g. a finance company.

Side note: Order XXX – lists the prayers in the High Court.

Terms of Hire Purchase Agreements

Most hire purchase agreements contain elaborate and express provisions that
regulate the rights and obligations of the parties. Inter alia, these provisions
usually relate to:
(a) Payment of the purchase price
(b) Insurance of the goods (purchaser responsible?)
(c) Keeping of the goods in the possession or control of the hirer
(d) Keeping the goods free from distress, execution or other legal
encumbrances
(e) Termination of the agreement

Hire purchase agreements also contain implied terms i.e.

[a] Implied terms as to title
(i) There is the implied condition on the part of the owner that he has
the right to sell the goods at the time when the property is to pass
to the hirer i.e. when all the instalments are paid.
(ii) There is an implied warranty that the goods are free from any
charge or encumbrance not disclosed or known to hirer before
agreement is made.
29
 (iii)There is an implied warranty that the hirer will enjoy quiet
enjoyment of the goods during the period of the hire.
[b] Implied terms as to quality and fitness
(i) There is the implied condition that the goods are of “merchantable
quality”
(ii) Also that the hired goods are reasonably fit for their intended
purpose.

Duties and Rights of the Owner/Seller and the Hirer/Buyer

At common law the owner must deliver the goods to the hirer and if the hirer
refuses delivery the owner’s remedy in the absence of an express provision
otherwise, is not to sue for the instalments but to sue for damages for breach
of contract.

The hirer has the duty to inform the owner of the whereabouts of the goods
on receiving a written request to do so (until the last instalment the owner is
the owner!)

The hirer has the obligation to pay rent or instalments agreed upon in relation
to the purchase price of the goods.

The hirer is usually given the right to exercise the option to buy the goods by
paying a lump sum at any time during the currency of the HP agreement. (to
save interest, insurance costs etc.)

As a general rule, the hirer is under an obligation to take reasonable care of

the goods but is not liable for loss, unless due to his negligence. The hirer is
not liable for damage due to normal wear and tear.

The hirer must not use the goods for any purpose other than that for which
they were hired and must return the goods to the owner on termination of
the agreement if he fails to complete the purchase.

Termination of a HP Agreement
Can be effected by:
(a) Performance: where the hirer pays all the instalments necessary to
exercise his option to purchase.
(b) Determination of the agreement by either party
(c) Breach by either party amounting to a repudiation of the agreement
(d) Rescission of the agreement for fraud, misrepresentation or mistake.

Finance Lease (Mumba Malila - p 314)

Finance lease agreements are similar to HP agreements but there are
differences, the most important being that the former does not contemplate
30
the leased goods eventually becoming the property of the lessee whereas
under a HP agreement this is the case i.e. the hirer will eventually own (i.e.
acquire legal title to) the hired goods after paying the agreed number of
instalments. In a finance lease, the lessee selects the equipment to be
supplied and the lessor provides the funds, acquires title to the equipment
and allows the lessee to use the equipment during the lease period. The
lessee bears the risks to loss, destruction, depreciation and malfunction of the
equipment and also bears the maintenance, repairs and insurance costs. An
important feature is that is the lease is terminated before the expiry date, the
lessor is, in addition to repossessing the leased equipment, entitled to recoup
its capital investment and its finance charges less any proceeds from the sale
of the repossessed goods. See: Industrial Credit Co. Ltd. v. Plavmark (Z) Ltd.
2003/HPC/298 esp. p.11

Partnerships
Section 2 of Partnership Act of 1890 defines a partnership as a “relation which
subsists between persons carrying on a business in common with a view of
profit”. A relation between members of a company is excluded from this
definition. S1(3) – persons who enter into partnership with each other are
collectively called a firm.

Distinction Between Partnerships and a Limited Company

(a) Formation: Partnerships are easier and cheaper to form and maintain.
More expenses are incurred in incorporating a company 11 and filing
annual returns.
(b) Accounts: It is not necessary to disclose partnership accounts.
Company accounts are public, especially those for public companied
listed on the LuSE.
(c) Debts: A partner is liable for the debts of the firm. A shareholder is not
liable for the debts of the company once his shares are fully paid up.
(d) Property: The partners own a firm’s property in common. A company
has separate legal identity/personality and owns its own property in its
own right.
(e) Transfer of Shares: The general rule is that without the consent of the
other partners, a partner cannot transfer his share of the partnership
to another so enabling that other to become a partner. Shares,
especially in Plc Co., freely transferable.
(f) Agency: A partner can make a contract as an agent of the firm.
Shareholders are not generally agents of the company (directors are).
(g) Death/Bankruptcy: This dissolves a partnership unless there is
agreement to the contrary. Company continues even if a shareholder
dies/become bankrupt.

11
K 245,000 but registering a business name is only K 80,000.

31
Three Essential Elements of a Partnership
(a) It must be a business
(b) The business must be carried on in common between two or more
partners
(c) Persons carrying on the business must do so for profit and unless the
profit is shared, the partnership relationship cannot exist. Re: Fisher
and Sons [1912] 2 KB 491

Formation of a Partnership
Persons wishing to form a partnership must have the necessary capacity. A
limited company may be a partner so long as it is not ultra vires its articles. A
minor may be a partner but he may repudiate the partnership agreement
while still a minor or within a reasonable after attaining his majority. However,
a minor is not liable for partnership debts incurred during his minority.

Illegal Partnerships
Illegal if formed for a purpose that is contrary to public policy or where the it
cannot be carried on without breaking the law. Where a partnership is found
to be illegal the court will not recognise any rights of the partners inter se i.e.
between the partners themselves. A partnership is automatically dissolved on
the happening of any event that makes it unlawful for the business of the firm
to be carried on.

Essential Clauses in a Partnership Agreement

(a) Nature of the Business or Practice: must be clearly stated in the

agreement to avoid the possibility of disputes as to what actually
constitutes the real business of the firm.
(b) Name of the Firm: can be any name provided it complies with the
requirements of the Registration of Business Names Act Cap 389. Also, the
physical address of the firm must be given when registering the name and
so people know it.
(c) Duration: The date that the partnership commences should be stated -
note that this date may be before the date of the agreement. The general
rule is that a partnership only lasts as long as the will of the partners,
unless a definite term is expressed or implied in the agreement.
(d) Capital of the Firm: The agreement must state the capital of the firm and
how the partners will subscribe this.
(e) Division of the Profits: All partners are entitled to share equally in the
profits of the firm unless they agree otherwise (senior and junior partners)
(f) Bank Accounts and Drawing of Cheques: Partnership articles must specify
into which bank account the firm’s money and income (cash/cheques) will
be deposited and it must also make provision as to the signatories to the
32
 bank account. Normally a senior partner signs cheques or if the partners
are all of equal rank, there must be provision that any or two of the
partners can sign.
(g) Management: Articles must state if all the partners are entitled to take
part in the management of the firm or only some of them. In the absence
of any provision, all partners are entitled to take part in management. Also
it is important to specify that no one partner can enter into any contract
worth more than a specified amount and also cannot give credit to a
debtor which is greater than a specified amount. A clause stating the
extent to which a partner can engage or dismiss an employee must be
provided.
(h) Accounts: Articles must provide for the keeping of books of accounts as
well as for preparing quarterly, half yearly and annual accounts.
(i) Death or Retirement: Articles can provide that death/retirement of a
partner will not automatically end the partnership in order that the firm’s
goodwill is not lost. Partners can agree to that the partnership should
continue.
(j) Restrictions on Retiring Partners: It is necessary to have a clause
preventing a retiring partner from carrying on a competing business.
However, such restriction can only be enforced if it is reasonable and this
will depend on the circumstances of each case. See: Whitehill v. Bradford
[1952] 1 All ER 115
(k) Arbitration: An arbitration clause is a must so that any disputes are not
settled by costly and public litigation that may damage the firm’s business
and the reputation of the partners is thus also protected.
(l) Retirement from the Firm: A clause that states that any partner can retire
by giving notice tom that effect.

Rights and Duties of Partners

s. 24 of the Partnership Act - sets out the rights subject to any express
agreement between the parties to the contrary.
(a) Capital and profits: All partners are entitled to share equally in the
capital and profits of the business. Similarly, they must also contribute
equally towards any losses sustained.
(b) Indemnity against liabilities: The firm must indemnify each partner in
respect of payments made and personal liability incurred by him in the
ordinary and proper conduct of the business of the firm. This right to
indemnify lies with respect to necessary acts but does not extend to
mere voluntary ones that the partner who undertakes the liability
thinks may be advantageous to him (I.e. acts must be done in the
interest of the firm.)
(c) Advances to the Firm: Partners who give advances to the firm in excess
of the amount that they agreed to subscribe as capital is entitled to
interest from the date of the payment of the advance. 24(3) of the Act
33
 puts the interest rate at 5% p.a. but in practice this is varied. Reason:
the advance is not an increase in capital but a loan upon which interest
is properly due.
(d) Interest of Capital: Subject to any agreement between the partners,
interest is not payable on the capital subscribed by any partner before
profits are ascertained.
(e) Management of the Firm: Every partner may take part in the
management of the partnership business unless there is a contrary
agreement. The law implies that each partner shall attend to, and work
in the business. If he fails to do so, this may be ground for dissolution of
the partnership and the court may order that such a partner
compensates the industrious partners for the extra trouble caused by
his idleness. [Note: although the law infers that partners must attend to
the business, the Partnership Articles may provide that where there are
junior and senior partners, the junior partners may be bound to attend
to the business but senior partners may not be obliged to do so.
Partnership deed may also contain a clause authorising each working
partner to take a salary in addition to his share of the profits. This
results in working partners receiving more than partners who are not
obliged to attend to the business of the firm.]
(f) Remuneration: Subject to any agreement to the contrary, no partner is
entitled to remuneration for acting in the partnership business, but
when winding up the firm after death/retirement/insanity of one of the
partners, all the work being thrown on the other partners will
necessitate some compensation to be paid to them out of the profits.
(g) Introduction of New Partners: No person may be brought into a
partnership without the consent of all the other existing partners.
However, if the partnership deed provides that one or more partners
shall have the option of introducing new partners, either as his
successor or otherwise, the other partners will be bound to accept
his/their nominee - see: Byrne v. Reid [1902] 2 ChD 735. Where a
person has been duly nominated as a partner under a clause in the
Partnership agreement and the other partners refuse to admit him as
partner, he can successfully get a court order compelling the others to
accept his nomination - although this will make working conditions
difficult.
(h) Differences on Matters relating to Partnership Business : Subject to any
contrary agreement, differences arising as to ordinary matters
connected with the partnership business may be decided by a majority
of the partners but no change may be made in the nature of the
business without the consent of all of the partners.
(i) Partnership Books: must be kept at the firm’s place of business and
every partner has the right to have access to any of them if he so
desires. This right may be exercised by a partner in person or through
34
 his agent provided the agent undertakes not to use the information so
acquired for any other purpose. Bevan v Webb [1901] 2 ChD 59.
(j) Expulsion of a Partner: A majority of the partners CANNOT expel any
partner unless there is a contrary agreement in the partnership
agreement. All partners must agree to expel a partner. In Re: A
Solicitor’s Arbitration [1962] 1 All ER 772; Green v Howell [1910] 1 ChD
495; Lisulo case in Zambia.
(k) Termination of Partnership: If there is no fixed termination date, any
partner may determine the partnership entered into between the
partners by e.g. resigning and then the partnership will fold.

Duties of Partners
Sections 28 and 30 of the 1890 Act impose the following duties on partners.
(a) Duty to render true account and full information : Partners must give a
true account and provide full information of all things affecting the firm
to any other partner or his legal representative. Law v. Law [1905] 1
ChD 140.
(b) Accountability for private profits: Every partner must account to the
firm for any benefit derived by him without the consent of the other
partners from any transaction concerning the partnership or from any
use by him of partnership property, name, or business connection. E.g.
where a partner uses his position to get a private agreement with the
firm’s customers in relation to goods dealt in by the firm and beneficial
only to himself. He must share the profits he makes with the other
partners because he is abusing his position as a partner for his own
ends and to the detriment of the business. Parthirana v Parthirana
[1967] AC 233.
(c) Accountability for profits from competing businesses: A partner who
carries on a business of the same nature as, and competing with that
of, the firm without the consent of the other partners must be
accountable for, and pay to the firm, all profits made by him in that
business. Trimble v Goldberg [1906] AC 494

Agricultural Credits
These are governed by the Agricultural Credits Act Cap 224. The Preamble
states:

“ An act to facilitate the borrowing of money on the security of charges

created upon farming stock, additional assets or other agricultural assets; to
provide for the registration of such charges; and to provide for matters
incidental to or connected with the foregoing.”

"agricultural charge" means a charge, lien or assignment created under

section three;
35
"agricultural commodity" means anything derived directly or indirectly from
cultivation; "cultivation" means crop production, animal husbandry, game
ranching, aquaculture, horticulture or forestry;

"farmer" means any person who, as owner or tenant of land uses such land
for cultivation, whether for profit or subsistence;

"farming stock" means all agricultural commodities, whether future growing

or severed from the land, and after severance whether subjected to any
treatment or manufacture and includes-
(a) livestock, poultry and bees, and the produce and progeny thereof;
(b) wild animals in captivity;
(c) fish stocks;
(d) timber both standing or cut;
(e) seeds and manures;
(f) fertilisers, insecticides, oils, and fuels;
(g) agricultural vehicles, trucks and truck spares, machinery, and other
plant; or
(h) any agricultural fixture that a tenant, or any person legally occupying
land, may by law be authorised to remove;

"holder" means a person in whose favour an agricultural charge is created,

and includes the executors, administrators and assignees of that person;

"trader" means any person who, as a broker, dealer, or otherwise, acquires

from a farmer or any other person, through purchase or otherwise, for the
purpose of resale, or processing, any agricultural commodity.

Types of Agricultural Charge

Section 3(1) states: “An agricultural charge may be fixed or floating, or both”.
Section 3(3) states: “A farmer, may, individually or in association, create in
favour of any person a charge on any farming stock, additional asset or other
agricultural asset security for-
(a) inputs or other items required for cultivation;
(b) sums advanced or to be advanced to the farmer; or
(c) sums paid or to be paid on the farmer's behalf under any guarantee;

and such security may also cover interest, commission and charges
thereon”

36
Effect of a Fixed Charge
By s.4(1) a fixed charge confers the following rights on the holder of the
charge.

4.(1) A fixed charge shall confer on the holder the following rights:
(a) a right, upon the happening of any event specified in the charge as
being an event authorising the seizure of property subject to the
charge to take possession of any property so subject; and
(b) where possession of any property has been taken, a right, after an
interval of fourteen days or such shorter period as may be specified
by the charge, to sell the property.

The proceeds of the sale by the Holder are governed by s.4(2).

s.4(2) Where a holder exercises the power of sale under paragraph (b) of
subsection (1), the holder shall apply the proceeds of sale in or towards the
discharge of the moneys and liabilities secured by the fixed charge, and the
costs of seizure and sale, and to pay the surplus, if any, of the proceeds to the
farmer.

Obligations of the Farmer/Trader under a Fixed Charge

Governed by s.4(3) which states:

“A fixed charge shall impose on the farmer, trader or related business, the
following obligations:

(a) an obligation whenever the farmer, trader or related business sells any of
the property, or receives any money in respect of any asset, comprised in the
charge, forthwith to pay to the holder the amount of the proceeds of the sale
or the money so received, except to such extent as the charge otherwise
provides or the holder otherwise allows, and any sum so paid shall be applied,
except so far as otherwise agreed by the holder, in or towards the discharge
of moneys and liabilities secured by the charge:

Provided that if the holder is a related business, the farmer or trader shall not
sell, except as provided under this section, the commodity for which he
received loans or advances of inputs or other items required for cultivation
but shall deliver to the holder the agricultural commodity in the amount
agreed in the charge;

(b) an obligation, in the event of the farmer, trader or related business

receiving any money under any policy of insurance on any of the property
comprised in the charge, forthwith to pay the amount of the sum so received
to the holder, except to such extent as the charge otherwise provides or the
37
holder otherwise allows, and any sum so paid shall be applied, except so far as
is otherwise agreed by the holder, in or towards the discharge of moneys and
liabilities secured by the charge.”

I.e. moneys received from the sale of any property comprised in a charge or
from insurance on that property should, unless agreed otherwise, be paid
over to the holder and set against the liability of the farmer to the holder.
Notwithstanding the above, under s. 4(4) an insurer may pay directly to the
holder. Thus:

“S.4(4) Where any money is due to a farmer, trader or related business, as the
case may be, under any policy of insurance on any of the property comprised
in a fixed charge, the insurer may, notwithstanding anything contained in the
insurance policy, pay such money to the holder of the charge to the extent of
the said charge, and any such payment shall be a valid discharge of the liability
of the insurer to the farmer, trader or related business, as the case may be, to
the extent of the amount so paid, and the provisions of paragraph (b) of
subsection (2) shall apply to the amount so paid as if it had been paid to the
holder by the farmer, trader or related business, as the case may be.”

Note a farmer etc. can sell the property that is subject to the charge if he
applies the proceeds to the charge. Thus:

“S.4(5) Subject to compliance with the obligations imposed by subsection (3) a

fixed charge shall not prevent the farmer, related business or trader selling
any of the property subject to the charge.”

Note by s.4(6) the holder has the right to recover the proceeds from a third
party if the third party knew that the proceeds were paid to him in breach of
the farmer’s obligations to the third party. Thus:
“S. 4(6) Where the proceeds of a sale made under subsection (2), are paid to
any person other than a person contemplated by or under that subsection,
the holder shall have a right to recover the proceeds from such person if the
holder proves that such person knew that the proceeds were paid to him in
breach of the farmer's, related business's or trader's obligations.”

Effect of a Floating Charge

Section 5 states:
“S.5. An agricultural charge creating a floating charge shall have the like effect
as if the charge had been created by a registered debenture issued by a
company.

Provided that-
(a) the charge shall become a fixed charge on the property upon:
38
 a. a receiving order in bankruptcy being made against the farmer, trader
or related business;
b. the death of the farmer or trader;
c. the dissolution of partnership in the case where the property charged
is partnership property; or
d. notice in writing to that effect being given by the holder on the
happening of any event which, by virtue of the charge, confers upon
the holder the right to give such notice; and
(b) the farmer, trader or related business, while the agricultural charge
remains a floating charge, shall be subject to the like obligation as in the
case of a fixed charge to pay over to the holder the amount received by
him by way of proceeds of sale, in respect of other agricultural assets or
additional assets under policies of insurance, or by way of compensation:

Provided that it shall not be necessary for farmer, trader or related business
to comply with such obligations if and so far as the amount so received is
expended in the purchase of farming stock which, on purchase, becomes
subject to the charge.”

Notice of Agricultural Charge

When selling any property subject to the charge a farmer etc. must give to the
purchaser, prior to the payment of the purchase price, a written notice
stating:
(a) the name and address of all persons holding an agricultural charge
over the farming stock or additional assets to be sold;
(b) the priority of the agricultural charges12; and
(c) the amount secured by each agricultural charge.

Thus Section 6(1) states:

6.(1) Notwithstanding sections three, four and five, any farmer, trader or
related business shall, when selling or causing to be sold, any farming stock or
additional asset which is subject to an agricultural charge, give to the person
buying, or the person effecting the sale of, the farming stock or additional
asset, before payment of the purchase price, a written notice which shall be
acknowledged by the purchasers or the person effecting the sale signing the
original and a copy of the notice, containing the following information:
(a) the name and address of all persons holding an agricultural charge over
the farming stock or additional assets to be sold;
(b) the priority of the agricultural charges; and
(c) the amount secured by each agricultural charge.

12
If more than one

39
Any person who gets such notice shall pay the proceeds of the sale to the
holder of the charge regard being made to the amount stated in the notice.
[This stops the farmer/ trader from pocketing the proceeds.] This will reduce
the liability of the farmer/trader under the credit but any surplus from the
proceeds will be paid over to the farmer/ trader. A person who contravenes
this statutory requirement is guilty of an offence and is liable on conviction to
the full value of the charge as specified in the notice.

Thus section 6(4) to 6(8) state:

(4) Any person who receives a written notice under subsection (1) shall pay
the proceeds of the sale to the holders of the agricultural charges in
accordance with the written notice and having regard to the priority and
amounts stated in the written notice and shall pay the surplus, if any,
remaining after making the payments, to the farmer, trader or related
business.

(5) Any person who contravenes subsection (4) shall be guilty of an offence
and shall be liable, on conviction, to the full value of the agricultural charge as
specified in the notice.

(6) Any moneys paid out in accordance with subsection (4) shall reduce the
liability of the farmer, trader or related business under the agricultural
charges created by the farmer, trader or related business, in order of their
priority, and the amount of each agricultural charge shall be reduced by the
amount so paid.

(7) Any payment made in accordance with subsection (4) shall discharge the
buyer or person effecting the sale on behalf of the farmer, trader, or related
business, as the case may be, from any claim, howsoever arising, in respect of
the proceeds of the sale.

(8) Any farmer, trader or related business who fails to give written notice in
accordance with this section shall be guilty of an offence and shall be liable, on
conviction, to a fine not exceeding ten per cent of the outstanding loan.

Registration of Agricultural Charges

Every agricultural charge must be registered within 30 days after execution
and in default the charge shall be void as against any person other than the
farmer/trader. But, the Registrar may extend the time for registration on such
terms as he deems fit if there is proof that the omission to register within the
stipulated time was accidental or inadvertent. The Register can be inspected
by anyone on payment of the prescribed fee but the publication of any list of
the charges is prohibited and there is a penalty of 1,000 penalty units upon
conviction if you do. Thus section 8(1) states:
40
8(1) Every agricultural charge shall be registered within thirty days after its
execution and if not so registered, shall be void as against any person other
than the farmer:

Provided that the Registrar may, in proof that omission to register within such
time as aforesaid was accidental or due to inadvertence, extend the time for
registration on such terms as he thinks fit.

And S. 8(3) and s. 8(4) state:

(3) The register kept and the memoranda filed under this section shall, at all
reasonable times, be open to inspection by any person on payment of the
prescribed fee, and any person inspecting the register or any memorandum
may, on payment of the prescribed fee, make copies or extracts therefrom.

(4) Any person may, on payment of the prescribed fee, require to be furnished
with a copy of any entry in the register or memorandum certified to be a true
copy by the Registrar.

While s. 9 states
S9.(1) Except as otherwise provided under this Act, a person shall not print for
publication or publish any list of agricultural charges or of the name of any
farmer, trader of related business who have created agricultural charges.

(2) A person who contravenes the provisions of sub-section (1) shall be guilty
of an offence and shall be liable on conviction to a fine not exceeding 1,000
penalty units.

(3) A prosecution for an offence under this section shall not be commenced
without the consent of the Director of Public Prosecutions.

Note also section 10:

10.(1) Any farmer, trader or related business who has created an agricultural
charge and who, with intent to defraud-
(a) fails to comply with the obligations imposed by this Act as to the
payment to the holder of any sums received by the farmer, trader or
related business by way of proceeds of sale, or in respect of other
agricultural assets, or under a policy of insurance or by way of
compensation; or
(b) removes or suffers to be removed any property subject to the charge;

41
shall be guilty of an offence and shall be liable, on conviction, to a fine not
exceeding 1,000 penalty units or to imprisonment for a period not exceeding 3
years, or to both.

(2) Where any related business, with intent to defraud, misrepresents its
rights and obligations under this Act or in any way deprives a farmer of his
rights under this Act, the directors and managers of the business committing
such violation shall be guilty of an offence and shall be liable, on conviction, to
a fine not exceeding 1,000 penalty units or to imprisonment for a period not
exceeding 3 years, or to both, unless they show that the offence was
committed without their knowledge or consent.

Validity of contracts for advances on inputs and other items

S.11 (1) A contract for the advancement to a farmer of inputs or other items
required for cultivation shall state
(a) The value of the inputs or other items at the time the inputs or items are
advanced to the farmer;
(b) The interest rate to be charged, expressed at an annual percentage rate;
and
(c) Any charges, fees or penalties the farmer will be required to pay if the
farmer does not pay or deliver the produce at the price agreed on, as
stipulated in the contract, unless subsection (1) of section six applies.

(2) Any trader or related business advancing any inputs or other items
required for cultivation shall furnish the farmer, at the time each input or item
is advanced, a written statement showing the value and cost to the farmer of
the input or item, the interest rate, and any charges, fees or penalties, as
provided under this section.

(3) Direct or indirect compounding of interest shall not be allowed as part of

the contract specified under subsection (1).

(4) Notwithstanding any other law, any person who advances inputs or other
items required for cultivation to a farmer and fails to fully disclose to the
farmer the cost of the input or item, the interest to be paid by the farmer, and
any changes, fees or penalties, as required under this s. shall be ineligible to
register a charge created by the farmer on the basis of an agreement or
contract, and such charge shall be void.

Failing to make full disclosure of cost of inputs or other items and interest,
etc.

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S12. Any person who advances inputs or other items required for cultivation
to a farmer and fails to fully disclose to the farmer the cost of any input or
item, the interest to be paid by the farmer, and any charges, fees or penalties,
as required under section eleven, shall be guilty of an offence and shall be
liable, on conviction, to a fine not exceeding 1,000 penalty units.

Arbitration
13. The Arbitration Act shall apply to the settlement of any dispute arising as a
result of the interpretation or application of the provisions of this Act.

Injunctive Remedies
Injunctions are interim protective orders that a litigant can get in a court
action. This type of relief is not granted as a matter of right but at the
discretion of the court, depending on the facts and circumstances of the
particular case. For an injunction to be granted, there must be a cause of
action i.e. an applicant must file a Writ of Summons and a Statement of Claim,
or an Originating Summons accompanied with an affidavit in support, where
the applicant will itemise the reliefs he is seeking from the court. These reliefs
may include an order for an injunction. If so, an applicant must also file an ex
parte summons for an interim injunction and an affidavit in support. He
should also prepare in advance an order of interim injunction to be signed by
the Court at the ex parte hearing to serve on the other party who is not
present at this hearing. He must also file a Certificate of Urgency and also
prepare an inter parte summons for an injunction where the date of the inter
parte hearing will be indorsed by the marshal. In summary the documents you
need to file are:

Writ and Statement of Claim (as well as skeletal arguments and list of
authorities)
And if one relief sought is an interim injunction, in addition you need to file:
(a) Ex parte summons
(b) Affidavit in Support
(c) Ex parte Order for Injunction
(d) Certificate of Urgency
(e) Inter Parte Summons (no affidavit needed - you will rely of ex parte
affidavit)

The ex parte order must have an undertaking by the applicant to pay damages
to the defendant if it is later found that the Order was obtained on frivolous
or vexatious grounds and the defendant has suffered loss or injury in the
process.

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Types of Interim13 Remedies
A litigant may apply at any time, & court may grant, the following interim
remedies:
(a) Interim Injunctions
(b) Interim Declarations e.g. that some property should be kept in a
particular manner pending finalisation of the dispute.
(c) Order for:
a. Detention, custody preservation of property
b. Inspection of property subject to a dispute
c. Sale of property that is perishable or which for any other reason
needs to be sold quickly.
(d) Order authorising a person to enter land/a building in possession of
another party to the proceedings.
(e) Order (also called a “freezing injunction”) for the purpose of restraining
a party from dealing with assets located within or out of jurisdiction -
achieved by an Order called a Mareva Injunction.
(f) Order (Search Order) requiring the defendant to admit the plaintiff into
premises for the purpose of preserving evidence - Anton Piller Order.
(g) Order directing a party to provide information about the location of
some relevant property or assets that are subject or may be subject to
an application for a freezing injunction.

The applicant must give a full and frank disclosure of all material facts in the
dispute, as he who comes to Equity must come with clean hands. For this
reason the applicant must make proper enquiries before making his
application. All relevant and material facts must be disclosed so as to enable
the court to exercise its discretion properly. The consequences of not
disclosing such facts are that the ex parte Order obtained may be set aside
without regard to the merits of the application. The plaintiff should give
particulars of his claim(s) against the defendant stating the grounds for his
claim(s) and, if a monetary claim, the amount involved.

General Nature of Injunctions

An injunction is an Order of the Court (but not the Registrar or Deputy
Registrar who deal with taxation of costs and assessment of damages, etc.)
that restrain the commission or continuance of some wrongful act or the
continuance of some omission. An injunction is said to be prohibitory if it
forbids or prohibits the commission of an act. If it directs that a positive act is
to be done e.g. to repair some omission, the injunction is called a mandatory
injunction.

13
I.e. Reliefs or remedies sought before the final determination of the main action.

44
There is also a distinction between injunctions granted by a final order and
that granted by an interlocutory order. Injunctions granted by judicial decision
after the plaintiff has established the existence of his rights in law and the fact
that the defendant has infringed such a right or is about to do so after the trial
is described as a perpetual injunction. Others are interlocutory injunctions. An
order of injunction before judgment is called an interlocutory order.
Generally, an interlocutory injunction will follow as soon as possible on the
issuance of the Writ.

Principles Applied to Injunctions

When an application is made for an injunction the court has a difficult
jurisdiction to exercise. This is because it is often made ex parte and the only
comfort is that the other party is given an opportunity to be heard during the
inter parte hearing of the application. In the case of Thompson v Park [1994] 1
QB 408, at p. 411, the Court observed that it is sometimes impossible to make
an order that will not do some injustice to one party or the other. The
procedure to be adopted in preparing an application has been espoused in
many authorities.

In American Cyanamid Co. v Ethicon Co. Ltd. [1977] AC 396, p. 406 the Court
said, “the objective of interlocutory injunctions are to protect the plaintiff
against injury by violation of his rights for which he could not be adequately
compensated in damages recoverable in the action if the uncertainty were
resolved in his favour at the trail but the plaintiff’s need for such protection
must be weighed against the corresponding need of the defendant to be
protected against injury from his having been prevented from exercising his
own rights for which he could not be adequately compensated must be
weighed against the corresponding need of the defendant to be protected
against injury from his having been prevented from exercising his own rights
for which he could not be adequately compensated the plaintiff’s undertaking
in damages if the uncertainty were resolved in the defendant’s favour at the
trial. The court must weigh one need against another and then determine
where the balance of convenience lies.”

In Shell and BP (Z) Ltd. V Conidaris [1973] ZR, the SCZ said “The court will not
generally grant an interlocutory injunction unless the right to relief is clear and
the injunction is necessary to protect the plaintiff from irreparable injury.
Mere inconvenience is not enough. Irreparable injury is injury that is
substantial and can never be atoned in damages.”

Preston v Luck [1884] 2 ChD 497, p. 506 “Of course to entitle the plaintiff to
interlocutory injunction, though the court is not called upon to decide finally
on the rights of the parties, it is necessary that the court be satisfied that

45
there is a serious question to be tried at the hearing and that on the facts
before it, there is a probability that the plaintiffs are entitled to relief.”

Turnkey Properties v Lusaka West Dev Co Ltd & Others [1984] ZR 85 - SCZ
held:
(a) An interlocutory injunction is appropriate for the preservation or
restoration of a particular situation pending trail.
(b) It is improper for a court hearing an interlocutory application to make
comments which may have the effect of pre-empting decision on the
issues which are to be decided on the merits at the trail.
(c) An interlocutory injunction should not be regarded as a device by
which an applicant can attain or create new conditions favourable only
to himself. In applying for an interlocutory injunction the possibility of
damages being an adequate remedy should always be considered.

Anton Piller Order

The characteristics of an Anton Piller Order are that it seeks to seize evidence.
The order is named after the case in which this order was first granted i.e.
Anton Piller KG v Manufacturing Processes Ltd. [1976] 1 All ER 779; [1976] 1
Ch 55. In an Anton Piller Order, the conduct sought to be restrained is always
alleged to be a wrong infringement of the plaintiff’s rights e.g. copyright. The
applicant must show that evidence is likely to be destroyed, lost or hidden and
must also undertake not to allow any other person, including customs officers,
to have access to any documents or goods seized for the purpose of evidence,
without the leave of the court. E.g. a singer sees pirated CDs of his album at
Kamwala market. He can apply for an Anton Piller Order to have them seized
as evidence in his suit against the venders and distributors.
For a court to grant an Anton Piller Order, the applicant must establish:
(a) That he has a strong prima facie case against the defendant(s).
(b) That the risk of damage on their part must be very strong i.e. they will
suffer serious damage if the Order is not granted.
(c) That the defendant(s) has/have in his/their possession documents or
other relevant evidence that the plaintiff id seeking to seize.
(d) That the defendant(s) is/are likely to dispose/destroy such
documents/other evidence.

Alternative Dispute Resolution (ADR)

There are other dispute resolution mechanisms that are an alternative to
litigation. These include, inter alia, mediation and arbitration.

Mediation
This is a process of negotiation facilitated by or through the intervention of a
neutral third party called a mediator. He helps the parties to communicate
their position on the issues relating to the dispute and in exploring possible
46
solutions to reach a settlement. Unlike an arbitrator or a judge, a mediator
does not decide or adjudicate the dispute between the parties. He is merely a
facilitator who helps them reach a consensus by listening to them and
suggesting a compromise. Mediation is a voluntary and non-binding process
and parties themselves must be willing to come to some sort of settlement.
The process of mediation is non-adversarial, where parties are encouraged to
look at the broader aspects for their interests instead of focusing on the
narrow aspects of their rights and obligations. The process is not restricted by
legal principles or rules of procedure that are used in litigation. I.e. the parties
are not required to prove their cases on a balance of probabilities, by using
legal rules and principles of evidence or by calling witnesses and exhibits. For
this reasons a mediator is usually more skilled oriented than legal knowledge
oriented. A good mediator must have excellent negotiation and problem
solving skills.

In Zambia the process of mediation is “court annexed” i.e. it is triggered by a

court process (in other countries it may be undertaken without a court
requiring the parties to try mediation). Thus O.31 r.4 states “Except for cases
involving constitutional issues or the liberty of an individual or an injunction or
where the trial judge considers the case to be unsuitable for reference, every
action may, upon being set down for trial, be referred by the trial judge for
mediation and where mediation fails, the trial judge shall summon the parties
to fix the hearing date.” In the commercial list, this is normally done at the
scheduling conference but note that a judge may only refer a matter to
mediation with the consent of the parties or their counsel. He can’t force
mediation on them.

Advantages of Mediation
(a) Since mediation is not constrained by legality and procedural rules, it is
easy for the parties to tailor a flexible format to suit their own specific
requirements. Thus, medication can be quite informal and speedy to
the extent that a simple or less complex dispute can be settled in a few
days as opposed to litigation or arbitration that may take months or
years.
(b) As it is speedy, the costs incurred by the parties are considerably lower.
[Unfortunately mediation processes collapse, as some lawyers are not
interested in a quick settlement].
(c) In mediation, the focus is not necessarily what is legally correct but
rather what the parties’ joint interests are. Thus a party may forgo
certain of its rights in order to arrive at a quick settlement.
(d) Most importantly, parties often have greater commitment to the
solution or decision reached since they fully participated in generating
that decision. This means that the decision reached is more likely to be
enduring and respected.
47
Disadvantages of Mediation
(a) As mediation requires the consent of the parties, it is bound to fail if
there is no goodwill or willingness or good faith on their part to the
process.
(b) Mediation cannot succeed if one party is bent on causing delay by
insisting on litigation or one party uses the process simply to delay
litigation.
(c) Similarly, mediation is not appropriate and will not succeed if the
parties are desirous of setting a precedent.

Mediation Procedure
The mediator usually starts with a joint session that is attended by the parties
and their representatives. At the joint session, issues in dispute are
highlighted by the mediator and ground rules (e.g. confidentiality and
maintaining civility) are set out. After this the mediator has individual sessions
with each of the parties in turn. These private sessions (sometimes called
“caucuses”) help the parties in being more forthcoming with their ideas and
suggestions than they may be in the presence of the other party. If an
agreement is reached, it is recorded in a written form and signed by the
parties. It then becomes a consent judgment that can be enforced like any
other judgment in of the court. [Can a party apply to set aside a consent
judgment? No, as it is not a court judgment. A party can only challenge a
consent judgment by commencing a fresh action in court to overturn it on the
basis of it being entered as a result of fraud, mistake etc.]

Arbitration
The process where a dispute is put to one or more mutual party(ies) chosen
by the disputing parties for a final, binding and enforceable decision.

Characteristics of Arbitration
(a) Parties submit disputes to a mutual arbitrator or arbitrators for a
decision on the merits (i.e. each party will give evidence and be cross-
examined etc.)
(b) Each part will have the opportunity to present evidence to the
arbitration tribunal in writing and through witnesses.
(c) Proceedings are more informal that court proceedings and strict
adherence to evidential and procedural rules is not usually required
(but Evidence Act does apply).

Differences Between Arbitration and Mediation

(a) Arbitration is binding once the parties have an arbitration clause in
their agreement i.e. parties are bound by that clause i.e. they must

48
 settle the dispute by arbitration not litigation. Mediation is non-
binding.
(b) An arbitrator decides the dispute while a mediator helps the parties
themselves to decide the dispute. Arbitrator performs a quasi-judicial
function.
(c) There are formal legal procedures in arbitration (e.g. call witnesses,
cross-examination etc.) but there are no such procedures in mediation
and it is not limited by legal doctrines.
(d) An arbitration award is legally enforceable while mediation is only
enforceable with the consent of the parties.
(e) Arbitration focuses on the rights of the parties. Mediation focuses on
the interests of the parties.
(f) The arbitration process is knowledge-based (i.e. arbitrator must have
knowledge of the law) while medication is skill based (i.e. mediator
needs to possess negotiating skills).
(g) In arbitration, a winner takes all - a win/lose situation. In mediation,
both sides will benefit - it is a win/win situation.
(h) Arbitration can be tedious and costly. In theory, mediation can be
speedy ands cost effective.

Similarities between Arbitration and Mediation

(a) Confidentiality: both processes are confidential. [Mediator tears all the
notes of the medication proceedings before putting the consent
judgment on file].
(b) Private: They are not open to the public – they are only attended by the
parties concerned, their lawyers and other representatives.

Advantages of Arbitration over Litigation

(a) Expertise: of the decision maker. An arbitrator is not imposed on the
parties unlike in litigation where the parties have no choice of who
should adjudicate their dispute. In arbitration, parties can choose the
decision maker who is an expert in the subject matter of the dispute.
(b) Finality of the Decision: the courts will always respect a provision that
the arbitration award is final and binding on the parties. This serves to
discourage appeals to the courts of law and to make the provisions for
finality meaningful. In litigation, every decision can be appealed
against, except those of the SCZ.
(c) Privacy of Proceedings: If the parties wish proceedings to be shielded
from public scrutiny then arbitration, that is a private forum, is more
preferable to the courts that will rarely deny public access.
(d) Procedural Informality: Since the parties in arbitration determine the
procedural rules to apply to the arbitration they can opt for simplicity
and informality. There is no such departure from procedure in
litigation.
49
 (e) Low cost: In theory, simplified procedures tend to reduce costs as does
the lack of opportunity to appeal against an arbitrator’s award.
[However, an award can be challenged by applying to court to set it
aside on the grounds set out in s.17 of the Arbitration Act of 2000 e.g.
the award went beyond the scope of the arbitration].
(f) Speed: The same factors that tend to reduce costs also lead to a more
speedy resolution of a dispute. In addition, parties need not wait for a
trial date to be assigned to them but can proceed to arbitration as soon
as they and the arbitrators are ready. [In arbitration there is a
“preliminary meeting” - like a scheduling conference - where orders for
directions are given.]

Note: some of these are only theoretical advantages and in practice they may
not be realized e.g. an arbitrator is paid fees (often quite high) whereas a
judge is paid by the State and not by fees.

Section 6 - Maters subject to Arbitration and Exceptions

S.6(1) states that “Subject to subsections (2) and (3) any dispute which the
parties have agreed to submit to arbitration may be determined by
arbitration.”

Subsection (2) gives exceptions

(a) An agreement that is contrary to public policy
(b) A dispute, which, in terms of law, may not be determined by arbitration
(e.g. the winding up of a Co. - can only be done by petitioning the High
Court).
(c) A criminal matter, unless permitted by written law or court grants
leave.
(d) A matrimonial cause e.g. petition to dissolve a marriage.
(e) A matter incidental to a matrimonial cause e.g. maintenance or
custody, unless by leave of the court.
(f) The determination of paternity, maternity or parentage of a person.
(g) A matter affecting the interests of a minor or a person under legal
incapacity unless a competent person represents such minor/person.

Section 10 - a court is obliged to stay proceedings and refer the parties to

arbitration if there is an arbitration agreement unless the court finds that such
an agreement is null and void, inoperative or incapable of being performed.

Section 11 - Notwithstanding s.10, the court under s.11 may, on application by

any of the parties in the matter that is subject to arbitration, grant the
following orders:
(a) An order for the preservation, interim custody, sale or inspection of any
goods that are the subject matter of the dispute.
50
 (b) An order securing the amount in dispute or the costs and expenses of
the arbitral proceedings.
(c) An interim injunction or other interim order; or
(d) Any other order to ensure that an award, which may be made in the
arbitral proceedings, is not rendered ineffectual (or nugatory)

Characteristics of an Arbitration Agreement

An arbitration agreement or clause in a contract is treated as a separate &
independent agreement that survives the termination of the underlying
contract. This is known as the severability or separability doctrine. In,
Heyman & Another v. Darwins Ltd [1942] AC 356, Lord McMillan described an
arbitration clause as follows:
“An arbitration clause in a contract is quite distinct from the other clauses.
The other clause set out the obligations which the parties undertake towards
each other but the arbitration clause does not impose on one of the parties
any obligation in favour of the other. It embodies the agreement of both
parties that if any dispute arises with regard to the obligations which one
party has undertaken to the other, such dispute shall be settled by a tribunal
of their own constitution. The purpose of the contract has failed but the
arbitration clause is not one of the purposes of the contract.” [See also Lord
Diplock’s three characteristics in Hannah Blumenthal [1985] 1 All ER 34].

The Arbitration Process

For a dispute to be referred to arbitration, the contract between the parties
must contain an arbitration clause to that effect. However, even if it doesn’t,
the parties can enter into an ad hoc arbitration agreement which they sign
agreeing to refer their dispute to arbitration [They must agree - see s.6(1)]

The next stage is to appoint/constitute the arbitral tribunal in accordance with

s.12. How is this done? In general the tribunal is appointed through 1 of the
following ways
(a) By direct appointment by the parties pursuant to the procedure set out
in the arbitration clause or ad hoc agreement or otherwise.
(b) In a three-person tribunal, each party appoints one arbitrator and
these two then appoint the third (the chairman).
(c) By an appointing authority e.g. LAZ, Zambia Centre for Dispute
Resolution (ZCDR) , ZCAS
(d) By a competent court.

In the event that the parties fail to agree on the procedure of appointing the
arbitration tribunal s.12(3) states that the appointment shall be as follows:
(a) In an arbitration with three arbitrators, each party appoints one and
these two appoint the third. If (a) a party fails to appoint its arbitrator
within 30 days of receipt of a request to do so from the other party or
51
 (b) if the two arbitrators fail to agree on the third within 30 days of
their appointment, then the appointment shall be made upon request
of a party by an arbitral institution e.g. ZCDR. This decision is not
subject to appeal - see s.12(5)
(b) In an arbitration with a sole arbitrator, if the parties are unable to
agree, the arbitrator is appointed, upon request of a party, by an
arbitral institution.

S.12(4) - if there is failure even by the arbitral institution, in appointing the

arbitral tribunal, any party may request the court to take the necessary
measures to secure the appointment of the tribunal and the court’s decision is
not subject to appeal.

The Role of the Tribunal Chairman

The chairman of a three-member tribunal is also an arbitrator. As such he is
vested with jurisdiction from the date of his appointment just like the party
appointed arbitrators. Where there is a difference among the three (on
procedure?) then the decision of the chairman shall prevail (but the arbitral
award is by majority decision).

Qualities and Qualifications of Arbitrators

Whether the arbitration is domestic or international, s.12(6) gives the
following requirements as the necessary qualifications for appointment as an
arbitrator.
(a) Qualifications imposed by the parties in the agreement. The arbitration
clause may stipulate the qualifications desired by the parties of the
person they wish to arbitrate their dispute. The appointment will not
be valid unless the nominee meets all the qualifications agreed by the
parties. It also follows that any award made by such unqualified
arbitrator is void.
(b) Independence of the arbitrator. The concept of independence of the
arbitrator relates to questions that may arise out of the relationship
between the arbitrator and one of the parties. It may be financial or
otherwise. An independent arbitrator is one who is not under pressure
from, or dependent upon, a party on account of the relationship. An
arbitrator should not have direct professional relations with one of the
parties or financial interest in the outcome of the arbitration. In case of
a sole arbitrator in an international 14 arbitration, he should not be of
the same nationality as that of either of the parties.
(c) Impartiality relates to bias or prejudice of an arbitrator either (i) in
favour of one of the parties or (ii) in relation to the issue in dispute.
Partiality of an arbitrator will be evident in the following circumstances:

14
One or more of the parties is not Zambian

52
 a. If he applies a procedure in the arbitration which is not in
accordance with notions of due arbitral process of equality of
treatment of parties.
b. If he fails to observe the rules of natural justice.

Termination of an Arbitrator’s Mandate

An arbitrator’s mandate may be terminated in the following circumstances:
(a) By virtue of a successful challenge by a party under Article 13(2) of the
Model Law in Schedule 1 of the Arbitration Act No. 19 of 2000 on the
grounds provided under Article 12(2) of the Model Law [UNCITRAL 15
Model Law]
(b) Failure or impossibility of the arbitrators to act in the following
circumstances:
a. One is unable to perform his duties due to incapacity
b. If arbitrator fails to act without undue delay [Art. 14 of Model
Law]
(c) By an agreement of the parties at any time to revoke/terminate his
mandate
(d) By an arbitrator withdrawing due to any reason e.g. his own doubts as
to his impartiality or independence.
(e) When the arbitrator becomes “functus officio” Article 32(2). I.e. his
mandate ends when he makes his arbitral award.

Procedure for Challenging an Arbitrator

An arbitrator’s appointment can only be challenged by a party if there are
valid grounds for doing so. See Article 12(2) of the Model Law. This restriction
is intended to prevent parties from disrupting arbitral proceedings by making
frivolous challenges. To pre-empt such challenges it is incumbent on the
arbitrator to disclose to the parties any circumstances that are likely to give
rise to possible challenges in respect of his impartiality and independence.
Where possible this should be done at the time of his appointment. The
challenge procedure is specified in Article 13 of the Model Law as follows:
(a) The parties may agree on the procedure for challenging the arbitrator;
(b) If there is no agreement the party making the challenge should within
15 days of becoming aware of the constitution of the tribunal or of the
circumstances giving rise to justifiable doubts as to arbitrator’s
impartiality or independence, send a written statement of reasons for
the challenge to the arbitrator.

The following options are available to a challenged arbitrator.

(a) To withdraw/recuse himself - this does not mean he accepts the
validity of the grounds of the challenge.

15
United Nations Commission on International Trade Law.

53
 (b) To withdraw from office if the other party also agrees to the challenge.
I.e. ask the other party and if he agrees with the challenge step down,
but again this does not mean arbitrator accepts the validity of the
grounds of the challenge.
(c) The arbitrator can constitute himself into a tribunal for the purpose of
deciding on the challenge. When he does so, he should hear both sides
on the issues. If, after hearing the parties, the arbitrator decides the
challenge is successful, he must withdraw. If he decides otherwise, he
may continue with the arbitration. If the challenging party is dissatisfied
with the arbitrator’s decision, he must within 30 days from the date of
receiving the decision, apply to court for a determination on the
challenge. The court will not be hearing the matter in an appellate
capacity but making a decision on the merits of the challenge itself. I.e.
the court will hear the grounds advanced and decide. The court’s
decision is final and not subject to appeal.

Preliminary Meeting
After the arbitrator has accepted his appointment the next sage is to convene
a preliminary meeting attended by the parties and their lawyers. The
preliminary meeting is like a scheduling conference in the Commercial Registry
as it is here that the arbitrator and the parties agree on the future conduct of
the arbitration after which an order for directions is issued by the arbitrator.

Agenda of the Preliminary Meeting

(a) To see the original agreement so as to ascertain that there is an
arbitration clause and its stipulations e.g. arbitrator’s qualifications.
(b) To identify the issues in dispute. Unlike in litigation, the arbitrator is
given what the parties conceive to be the dispute upon which he
should arbitrate upon and the parties must sign off on what the dispute
to be resolved is.
(c) The arbitrator’s schedule of charges i.e. his fees and whether the
parties accept these before he proceeds further with the arbitration.
(d) Representation: will counsel represent the parties or not.
(e) The law pursuant to which the arbitration will proceed (but note that
the procedural law to be followed will always be the Arbitration Act of
2000).
In the Matter of
And
In the Matter of the Arbitration Act No. 19 of 2000
(f) Procedures and rules to apply to the arbitration as taken from the Act
No. 19
(g) Whether the award shall be reasoned or not i.e. whether the reasons
should be stated for the award or not. But in Zambia; s.16(2) of Act No.
19 of 2000 requires that a reasoned award be given.
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 (h) Programme for the submission of:
a. Statement of Claim
b. Defence and counterclaim if any
c. Reply and defence to counterclaim if any
(i) Discovery: Timetable for the exchange lists of documents, inspection of
documents and when bundle of documents will be served. Also agree if
the arbitration will only be on documents or also whether witnesses
will be called.
(j) Hearing date: agree how much time will each party will require at the
hearing
(k) Witnesses: how many will be called, how many are expert witnesses
and how many are witnesses of fact.
(l) Communication with the arbitrator: for transparency, parties must
know that when they communicate with the arbitrator, copies of such
communication should be sent to the other party.
(m) Date when the award shall be rendered: the arbitrator should
also be tied to a date (c.f.) a court.
(n) Taxation of costs: agree with the parties if costs are awarded and the
losing party does not agree the quantum whether the arbitrator or the
taxing master at the High Court will do the taxation.

Jurisdiction of An Arbitrator
In addition to challenging an arbitrator for lack of impartiality or
independence, a party can also challenge an arbitrator for lack of
jurisdiction16. In general, and arbitrator’s jurisdiction is derived from the
consent of the parties. An arbitrator has no jurisdiction in the following
circumstances:
(a) Where an agreement between the parties does not contain an
arbitration clause unless they enter into an ad hoc agreement to
arbitrate.
(b) If the arbitration agreement is invalid under the law which the parties
have subjected it to - see s.6(2).
(c) If the arbitrator has not been validly appointed e.g. he dose not meet
the prescribed qualifications.
(d) If the issue in dispute is one that was not contemplated by the parties
e.g. if the arbitration clause relates to a contractual dispute, a tortious
dispute between the parties would not be within the scope of the
arbitration clause.
In these circumstances an arbitrator has no jurisdiction.

However, an arbitrator is vested with one statutory jurisdiction i.e. his

competence to decide and rule on his own jurisdiction (conflict with rules

16
Jurisdiction - authority; Power - ability to act derived from your authority or jurisdiction.

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 of natural justice?). This is commonly referred to a Kompetenz-
Kompetenz. It arises only if his jurisdiction is challenged. Art. 16(1) of the
Model Law (1st schedule of the Act) states that an arbitral tribunal may rule
on its own jurisdiction including any objection with respect to the
existence or validity of the arbitration agreement.

The advantage of this doctrine is that it avoids delays and difficulties when
a question is raised as to:-
(a) Whether there is a valid arbitration agreement
(b) Whether the tribunal is properly constituted.
(c) Whether matters have been submitted to arbitration in accordance
with the arbitration agreement.

According to Art 16(2) a plea that the arbitration tribunal does not have
jurisdiction shall be raised not later than the submission of the defence i.e.
before the defence is served. Art 16(3) states that the arbitral tribunal may
rule on its own jurisdiction either as a preliminary question or in an award. A
party dissatisfied with the tribunal’s ruling may request a court to decide the
matter and the court’s decision shall not be subject to appeal.

The Award
Note: there are no dissenting awards in arbitration c.f. you can have
dissenting judgments in litigation. Section 16(1) of the Act states that the
award shall be in writing and shall be signed by the arbitrator(s). In arbitral
proceedings with more than one arbitrator, the signature of the majority of
the members shall suffice provided that the reason for any omitted signature
is stated. S. 16(2) states that the award must state the reasons upon which it
is based unless the parties agree otherwise. The award must also state the
date and place of the arbitration at which it shall be deemed to have been
made. After the award is made, a copy signed by the arbitrator(s) is delivered
to the parties [In practice, the arbitrator has a lien over the award for his
fees.] On request by any party, (within 30 days?) an award may be corrected
or interpreted by the arbitrator. The arbitrator can also correct the errors at
his own instance or initiative. See Art 33. The interpretation forms part of the
award.

Types of Award
An award may be:
Interim: this award is a determination of an issue during the course of arbitral
proceedings e.g. (a) an interim injunction; (b) an order for the deposit of the
fees, costs and expenses of the arbitration, (c) and interim measure for
protection in respect of the subject matter of the dispute. (See s. 14 of the
Act).

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Partial: like an interim award, a partial award is a determination of an issue
during the course of the arbitral proceedings which may result in the parties
saving time and money. E.g. (a) determination of the arbitral tribunal’s
jurisdiction; (b) determination of part of the claim that can easily be disposed
of during the hearing.
Final: this is an award that completes the mandate of the arbitral tribunal.
Once it is delivered, the tribunal becomes “functus officio” i.e. it ceases to
have any further jurisdiction over the dispute and the relationship existing
between the arbitral tribunal and the parties during the currency of the
arbitration comes to an end. There is however, one exception, i.e. when the
arbitral tribunal is requested by the parties (or one of them) to correct clerical
errors in the award OR interpret the award OR make an additional award.

Recourse against an Award

An award rendered by an arbitrator is final and binding on the parties as
provided by s.20(1) of the Act. The only recourse is to set it aside pursuant to
s.17(2) of the Act. This gives instances when an award can be set aside (by
applying to a court). I.e. by

[I] The party making the application furnishing proof that:

(a) A party was under some incapacity or the agreement is not valid under
the law the parties subjected it to.
(b) A party was not given proper notice of appointment of the arbitrator or
of the proceedings or was otherwise unable to present his case.
(c) The award goes beyond the scope of the arbitration (but matters which
were submitted to arbitration may be separated out).
(d) The composition of the arbitral tribunal or the procedure was not as
agreed by the parties or as provided by the Act or the law.
(e) The award is not yet binding on the parties or has been set aside or
suspected by a court, or under a law, of the country where it was
made.
[II] The court finding that:
(a) The subject matter of the dispute is not capable of settlement by
arbitration under the law of Zambia.
(b) The award is in conflict with public policy.
(c) The making of the award was induced or effected by fraud, corruption
or misrepresentation.

When a court sets an award aside, the court will normally send it back for
arbitration before a different tribunal. [Normally, as in litigation, costs of
arbitration “follow the event” i.e. costs normally go to the successful party.
Costs may be taxed.

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Recognition and Enforcement of an Award
A court shall recognize an arbitral award as binding regardless of the country
in which it was made see s.18. The party in whose favour the award is made
must file it in court for it to be recognized and enforced. Recognition alone is
sufficient if the loosing party willingly pays the amount awarded to the
successful party. If he is unwilling, the successful party must enforce the
award. Recognition and enforcement of an arbitral agreement may be refused
upon the grounds set out in s.19, which are identical to those above in s. 17
above which a party may use to set aside an award.

How do you make the Application to Set Aside?

See: the Arbitration Court Proceedings Rules of 2001. Done by an originating
summons to a High Court judge in chambers supported by an affidavit stating
the facts relied upon in support of the application and the date of the receipt
of the award and exhibiting:
(a) The original award or a certified copy thereof,
(b) The original arbitration agreement or certified copy.

Recognition and Enforcement of Foreign Arbitral Awards

The Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (New York Convention) is in the second schedule of the Act. Art 2
states that each contracting party (includes Zambia) shall recognize such
awards as binding – see Art 3 and 4. Note recognition may be refused on the
grounds set out in Art. 5 which are the same grounds as in s.17 and s.19
above.

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Revision: Exam
5 Q, Q1 compulsory 40%, 2 other Qs 30% each, 3 hours, Most Q are in parts.
Apportion time appropriately; spend more time on Q worth e.g. 10 marks c.f.
those with 5 marks. Answer easier Q first. Use good English and spelling. Show
that a logical legal mind is at work.
Problem Q - a set of facts are given, some may be irrelevant. Quickly
summarize the material facts and identify the legal principles involved always
citing the authority (statute or case law) for these principles. Relate these
principles to the material facts and draw the conclusion(s) required by the
question. When citing cases you may say “In a decided case….” so long as you
know the material facts of the case, understand the legal principle(s) laid
down by it and the case is relevant to your arguments and is appropriately
applied to it.

Oxford method - lecturer lectures

Socratic method - students read and lectures are by debate with Q and A.

Amiran and 3 others v Agroflora [2004]

Amiran argued that there was a conditional sale and property did not pass to
Agroflora, as the full price was not paid. Agroflora went into receivership as it
had a US$ 2m debenture and the debenture holder appointed a receiver.
Once appointed all assets crystallized and the receiver has a duty to pay the
creditors according to priority i.e. the debenture holder gets paid first.
Kajimanga held that the property did pass to Agroflora and did crystallize and
could be used to pay the debenture holder.

Differences in Procedure
In both the commercial list and the general list the plaintiff files a Writ and
Statement of Claim; the Defendant files a Memorandum of Appearance and
Defence. Thereafter, in the commercial list the judge calls a scheduling
conference where he gives orders for directions to the parties and as the
advocates are present it is not expected that there should be any slippage. In
the general list, the parties apply to the judge for orders for direction and
there is no scheduling conference. At the scheduling conference the time is
given for:
(a) The plaintiff to deliver a reply
(b) Discovery and inspection
(c) Filing of Bundles of Pleadings and Documents
(d) Filing and exchange of witness statements (should be within 21 days of
trial)
(e) Filing and exchange of skeleton arguments ands lists of authorities
(should be within 21 days of trial).
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 (f) The date for the Status conference

At the Status Conference:

The judge will see if the parties have complied with the orders given at the
scheduling conference, are ready for trial and sets the date of the trial. A party
can apply for an extension of time if necessary but may be condemned to pay
court hearing fees if the reasons are not too convincing.

At trial
There is no examination in chief and the plaintiff’s counsel starts by asking the
witness “Did you sign a witness statement?” Thereafter the witness is cross-
examined on his witness statement by counsel for the other side and then re-
examined by his counsel on issues arising from the cross-examination. Once
the witnesses for the plaintiff have testified, the defendant calls his witnesses
and the procedure is similar e.g. no examination in chief per se but witness is
cross examined and re examined.

Interlocutory Applications in the Commercial List

By summons (ex parte or inter partes) with an affidavit in support
Each must be accompanied by skeleton arguments and list of authorities.
If it is an injunction: also file a Certificate of Urgency, an Ex parte Order and an
Inter Parte Summons.

60 Days
If 60 days lapse from the date the action was commenced and nothing
happens, the judge will dismiss the action and the plaintiff must start again de
novo if he wants to proceed again.

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