CHAPTER SIX

MORTGAGES

6.0 Introduction

A mortgage was defined by Lord Lindley in Santley v Wilde,1 as a conveyance

of land or an assignment of chattels as security for the payment of a debt or the
discharge of some other obligation for which it is given. The security is
redeemable on the payment or the discharge of some other obligation,
notwithstanding any provision to the contrary. Section 65 of the Lands and Deeds
Registry Act2 has somewhat altered the common law nature of a mortgage as
defined by Lord Lindley in Santley v Wilde. Section 65 provides that a mortgage
is simply to operate as a security and not a transfer or lease of the estate or interest
thereby mortgaged. The section provides that:-

1.A mortgage of any estate or interest in land shall have

effect as security and shall not operate as a transfer or
lease of the estate or interest thereby mortgaged, but the
mortgagee shall have and shall be deemed always to have
had the same protection powers and remedies (including a
power of sale, the right to take proceedings to obtain
possession from the occupiers and the persons in receipt of
rents and profits or any of them and, in the case of land
held in leasehold, the right to receive any notice relating to
the land the subject of the mortgage which under any law
or instrument the mortgagor is entitled to receive) as if the
mortgage had so operated as a transfer or lease of the
estate or interest mortgaged.

6.1 The Nature of a Mortgage as a Contract and as an Interest in Land

A mortgage, like a lease, originates in a contract. The borrower of money (the

mortgagor) will enter into a binding contract with the mortgagee (the lender)
whereby a capital sum will be lent on the security of the property owned by the
mortgagor. As a contract the parties are at liberty to stipulate whatever terms they
wish for the repayment of the loan, the rate of interest and so forth.

Although a mortgage originates in a contract and partakes of many of the features

of a contract, it also, like a lease, constitutes a proprietary interest in the land. The
mortgagee obtains an estate in the land and the borrower retains an equity of
redemption which encapsulates his residual rights in the property.3

1
[1899] CH at P.474.
2
Chapter 185 of the Laws of Zambia.
3
Dixon, M, land law, London, Cavendish Publishing Limited, 1994, p.217.

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 Dixon has observed that the proprietary nature of a mortgage brings with it the
intervention and attention of equity and that this can result in a conflict between
the mortgage as an interest in land and the mortgage as a creation of a contract. 4

6.2 Types of Mortgages

There are two types of mortgages, namely, legal and equitable mortgages.

6.2.1 Legal Mortgage

A legal mortgage is a mortgage created in respect of a legal estate by deed of legal
mortgage or legal charge.

6.2.2 Equitable Mortgage

An equitable mortgage may be created in the following ways:-

(a) By deposit of title deeds.

A deposit of title deeds creates an equitable mortgage provided it could be
shown that the land was intended to be treated as security for a loan. Coote on
mortgages has observed thus:-

A deposit of title deeds by the owner of freeholds or leaseholds with his

creditor for the purpose of securing either a debt antecedently due, or a
sum of money advanced at the time of the deposit operates as an equitable
mortgage or charge, by virtue of which the depositee acquires, not merely
the right of holding the deeds until the debt is paid, but also an equitable
interest in the land itself 5

In relation to the creation of equitable mortgages, the learned authors of

Halsbury’s Laws of England have observed thus:-

A mere deposit of title deeds upon an advance, with intent to create

a security thereon but without a word passing gives an equitable
lien so that as between a debtor and creditor, the fact of possession
of the title deeds raises the presumption that they were deposited
by way of security.6

The learned authors of Megarry’s Manual of the law of Real Property have
observed thus in relation to equitable mortgages:-

…equity treats an enforceable contract to create a legal mortgage as an

actual mortgage, provided it is supported by sufficient evidence in writing
or a sufficient act of part performance. Similarly, an imperfect legal
mortgage satisfying these requirements is treated as an agreement for a
4
Ibid.
5
Leigh, R, coote’s treatise on the law of mortgages, 9th ed, vol 1, London, Stevens and Sons Ltd,
1977. p86.
6
3rd Edn, Butterworth and Co. Publishers Vol. 27, 1955, p.168, Para 263.

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 mortgage and thus an equitable mortgage. …since 1783 7 the rule has been
that a mere deposit of the title deeds which cannot be accounted for in any
other way is taken as part performance of a contract to create a legal
mortgage, even if not a word about such a contract has been said; such a
deposit thus creates an equitable mortgage the deposit must be made for
the purpose of giving security…8

In practice, where an equitable mortgage is created by deposit of title deeds, there

is usually some memorandum accompanying the deposit setting out the terms of
the mortgage. The memorandum may require the mortgagor when so requested to
execute a legal mortgage.9
(b) Mortgage of an equitable interest.
If the potential mortgagor only has an equitable interest in the land as opposed
to a legal estate, it follows, necessarily, that any mortgage of that equitable
interest will itself be equitable. For example, beneficiaries under a trust have a
mere equitable interest and can only create equitable mortgages.10

6.3 The Rights of The Mortgagor

The dual nature of a mortgage as a contract and as an interest in land means that
the mortgagor has rights arising under the contract of loan and from the protection
which a court of equity offers a mortgagor due to the proprietary interest they
retain in their property.11 The rights of the mortgagor are discussed below.

6.3.1 The Contractual Right to Redeem

Once a mortgage has been created there will normally be a contractual date set for
repayment of the loan; this is known as the legal redemption date. At common
law if the monies were not repaid on the legal redemption date, the property
vested in the mortgagee. This was unfair and so equity intervened and created the
equitable right to redeem i.e. it gave the mortgagor the right to redeem the
property even after the legal redemption date had passed.12

6.3.2 The Equitable Right To Redeem

Equity allowed the mortgagor an equitable right to redeem on any date after the
date fixed for redemption. Equity took the view that the property mortgaged was
merely a security for the money lent and that it was unjust that the mortgagor
should lose his property because he was late in repaying his loan 13. Equity

7
Since the decision in Russel v. Russel [1783] 1 Bro. C.C 269.
8
Hayton, D, megarry’s manual of the law of real property, 6th ed, London, ELBS, 1982 p.468-469.
9
Ibid.
10
Ibid, at p.468.
11
Dixon, M, supra note 3 p. 225
12
Hayton, D,supra note 8 page 462- see also speech of Viscount Haldane LC in G and C Kreglinger V.
New Patagonia Meat and Cold Storage Company, Limited [1913] AC 25.
13
Ibid.

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 compelled the mortgagee to reconvey the property to the mortgagor on payment
of the principal with interest and cost even if the legal date of redemption had
passed.14 In Salt v Marques of Northampton, Lord Bramwell described the
equitable right to redeem thus:-

it is a right not given by the terms of the agreement between the parties to
it, but contrary to them, to have back securities given by a borrower to a
lender, I suppose one may say by a debtor to creditor, on payment of
principal and interest at a day after that appointed for payment when by
the terms of the agreement between the parties the securities were to be
the absolute property of the creditor.15

6.3.3 The Equity of Redemption.

The equity of redemption represents the sum total of the mortgagor’s rights (in
equity) in the property which is subject to the mortgage. The equity of redemption
is the mortgagor’s right of ownership of the property subject to the mortgage, 16
and is an interest in land which can be dealt with like any other interest in land.17

The equity of redemption differs from the equitable right to redeem in that the
latter does not exist until the legal date of redemption is past, whereas the equity
of redemption exist as soon as the mortgage is made. 18 The equitable right to
redeem is one of the adjuncts of the equity of redemption19.

6.3.4 Equitable Principles Applicable to Mortgage Transactions.

In G and C Kreglinger and New Patagonia Meat and Cold Storage

Company, Limited20, Lord Parker attempted to sum up the equitable principles
applicable to mortgage transactions. His Lordships observed and commented
thus:-

My Lords, I desire, in connection with what I have just said, to add a few
words on the maxims in which attempts have been made to sum up the
equitable principles applicable to mortgage transactions. I refer to the
maxims, “once a mortgage, always a mortgage,” or “A mortgage cannot
be made irredeemable.

It is a fundamental principle of the law of mortgages that ‘once a mortgage,

always a mortgage’ even if this contravenes the terms of the contract between the

14
Ibid.
15
1892] A.C 1, at P.18.
16
Re Wells [1933] CH 29 at P. 52.
17
Hayton, D. supra note 8, at page 463.
18
G and C Kreglinger and New Patagonia Meat and Cold Storage Company, Limited [1913] AC 25.
19
Dixon, M. supra note 3.
20
[1913] AC 25 at page 53.

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 parties.21 The mortgagor’s right to redeem the mortgaged property or his ‘equity
of redemption’ as it is termed is a necessary incident to every mortgage and
cannot be clogged or fettered.22 The borrower has the right to have their property
returned in full once the loan secured on it has been repaid. A mortgage
transaction should not be seen as an opportunity for the mortgagee to acquire the
mortgagor’s property and for this reason the court of equity will intervene to
protect the mortgagor and their equity of redemption against encroachment by the
mortgagee.23 This protection manifests itself in various ways which are discussed
below.

6.3.4.1 Exclusion of The Right to Redeem

The right to redeem is inviolable and shall not be interfered with. Any provision
preventing a mortgagor from recovering his property after performance of his
obligation, is repugnant to the nature of the mortgage transaction. This is
illustrated in the maxims of equity “once a mortgage always a mortgage” and
that there shall be “no clog or fetter on the right to redeem.”

In Samuel v Jarrah Timber,24 a limited Company borrowed money upon the

security of their debenture stock subject to the lender having the option to
purchase the stock at 40% within 12 months; the loan to become due and payable
with interest at 30 days’ notice on either side. Within 12 months before the
company gave notice of their intention to repay the loan, the lender claimed to
purchase the stock at the agreed price. It was held that the option was void and
that the company was entitled to redeem the loan on payment of the principal,
interest and costs. In his speech Lord Lindley observed and commented thus:-

The doctrine, “Once a mortgage always a mortgage,” means that

no contract between a mortgagor and a mortgagee made at the
time of the mortgage and as part of the mortgage transaction, or,
in other words, as one of the terms of the loan, can be valid if it
prevents the mortgagor from getting back his property on paying
off what is due on his security. Any bargain which has that effect is
invalid and inconsistent with the transaction being a mortgage.25
Once a mortgage has been executed any separate and independent transaction
giving an option to purchase may be valid provided it does not defacto form part
of the mortgage.26

6.3.4.2 Postponement of The Right to Redeem

21
Dixon, M, supra note 3 at page 218.
22
See Salt V. Marquis of Northhampton, supra note 15.
23
Dixon, M, supra note 3 at p.227.
24
[1904] AC 323.
25
Ibid, at page 329.
26
Reeve v. Lisle [1902] AC 461.

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 A provision postponing the date of redemption may be valid provided that the
mortgage as a whole is not so oppressive and unconscionable that equity would
not enforce it.27 In Fairclough v Swan Brewery Co Limited, 28 a lease of seventeen
and a half years was mortgaged on conditions which prevented its redemption
until six weeks before the end of the term. This was held to make the equitable
right to redeem illusory and therefore void. In contrast the House of Lords in
Knights bridge Estates Trust Limited v Byrne,29 held that a clause postponing
redemption for 40 years was valid and binding, one of the most important reasons
being that the parties were large commercial entities who had entered into a
mutually enforceable agreement after being advised.

6.3.4.3 Collateral Advantages

A covenant is collateral where an obligation is placed on the mortgagor which is

independent of that of the performance of which the land is charged. Such clauses
are objectionable only if they are unconscionable or if they constitute a clog on
the right to redeem.30 In Noakes v Rice,31 a clause that the mortgagor would not
sell any beers other than those of the mortgagees in his public house for the 26
years of the mortgagor’s lease was held to be oppressive. In contrast in Biggs v
Hoddinott,32 where on similar facts but for a period of five years, the clause was
deemed to be valid.

In G and C Kreglinger and New Patagonia Meat and Cold Storage Company,
Limited, the House of Lords held that:

There is now no rule in equity that a mortgagee cannot stipulate in the

mortgage deed for a collateral advantage to endure beyond redemption,
provided that such collateral advantage is not either(1) unfair and
unconscionable, or (2) in the nature of a penalty clogging the equity of
redemption, or (3) inconsistent with or repugnant to the contractual or
equitable right to redeem.33

6.3.5 Rights of Mortgagee34

Where a mortgagor defaults under the terms of the mortgage, the mortgagee is
given various remedies, viz: sale, foreclosure, taking possession, appointment of a
receiver and suing on a personal covenant.
The learned authors of Megarry’s Manual of the Law of Real Property have, in
relation to mortgagee’s remedies, observed thus:

27
William,H,land law, London, Sweet and Maxwell, 1994, p.79.
28
[1912] AC 565.
29
[1939] CH 441, (1938) ALL. ER 618.
30
Supra Note 26.
31
[1902] AC 2 CH 307.
32
[1898] 2 CH 307.
33
[1913] AC 25.
34
See Generally Hayton, D,supra note 8 pp. 472-485.

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 A mortgagee is not bound to select one of the above remedies and pursue
that and no other; subject to his not recovering more than is due to him,
he may employ any or all of the remedies to enforce payment. Thus if he
sells the property for less than the mortgage debt, he may then sue the
mortgagor upon the personal covenant for payment; and this is so even if
the sale was by the court and the mortgagee, bidding by leave of the court,
has purchased the property.35

Two of the mortgagee’s remedies are derived from the common law (an action on
the covenant, and the right to take possession), one is equitable (foreclosure) and
two were formerly contractual and are now statutory (sale and appointment of
receiver).36

6.3.6 Sale

The mortgage deed will usually confer a power of sale. There is a statutory power
of sale given under the Conveyancing and Law of Property Act 1881. Every
mortgage whose provision shows no contrary intention has a power of sale
provided it is a mortgage under deed and the mortgage money is due. The
statutory power of sale is exercisable without any order of the court being
required. Section 20 of the Conveyancing and Law of Property Act provides for
circumstances or conditions precedent before the statutory power of sale may
arise or be exercised. The section provides: -

A mortgagee shall not exercise the power of sale conferred by this Act
unless or until:
(1) notice requiring payment of the mortgage money has been served on
the mortgagor or one of several mortgagors and default has been
made in payment of the mortgage money, or of part thereof, for three
months after service; or

(2) some interest under the mortgage is in arrears and unpaid for two
months after becoming due; or
(3) there has been a breach of some provision contained in the mortgage
deed or in this Act and on the part of the mortgage, or of some person
concurring in making the mortgage, to be observed or performed,
other than and besides a covenant for payment of the mortgage money
or interest thereon.

Most mortgage deeds do expressly exclude the application of section 20 of the

Coveyancing and Law of Property Act and in its place provide for shorter period
of default, say one month before the power of sale can arise.37
35
Ibid at page 484.
36
Ibid.
37
See, for instance, the case of Investrust Merchant Bank v. Ebrahim Yousuf, SCZ/4/2004
(unreported),excerpted under the section dealing with case law.

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 Section 66 of the Lands and Deeds Registry Act38 deals with the mortgagee’s
power of sale. Section 66 (1) provides that:-

66. (1) A power of sale of the whole or any part or parts of any property
subject to a mortgage shall become exercisable by a mortgagee if the
mortgage is made by deed and the mortgage money payable thereunder
has become due and the mortgage is not redeemed before sale, and every
such power of sale shall be with and subject to the powers and obligations
and other provisions relating to sales by mortgagees contained in the
Conveyancing and Law of Property Act, 1881, of the United Kingdom, or
any statutory modification thereof applicable in Zambia, but neither the
Registrar nor any person purchasing for value from such a mortgagee
shall be bound or concerned to see whether all or any of the provisions of
that Act have been complied with or whether any money remains due
under the mortgage.

The mortgagee is under legal duty to use reasonable care to obtain the best
possible price which the circumstances of the case permit. 39 A mortgagee cannot
sell to himself.40 A mortgage must obtain the true market value.41

6.3.7 Foreclosure

As pointed above under section 6.3.2, equity gave the mortgagor an equitable
right to redeem after he had lost his legal right of redemption. ‘Foreclosure’ was
the name given to the process whereby the mortgagor’s equitable right to redeem
was extinguishable and the mortgagee left owner of the property both at law and
in equity.42 Foreclosure is the confiscation of the mortgagor’s interest in the
property. The right to foreclose arises as soon as the legal date for redemption is
past.
6.3.8 Possession

At common law the mortgagee’s right to take possession was automatic because
the mortgage gives a legal estate in possession and is exercisable even if the
mortgagor is not in default43. A mortgagee will not normally exercise his right
until some default has occurred which will enable him to exercise his power.
Once he takes possession, a mortgagee is liable to account (unless taking of
possession is to enable him effect a sale). He must account not only for all that he
receives, but also for all he ought to have received44.

38
Chapter 185 of the Laws of Zambia.
39
Standard Charterd Bank v Walker [1982] 3 ALL ER 938.
40
Tse Kwong lam v Wongchit sen [1983] 1WLR 1349.
41
Cuckmere Brick Co. Ltd v Mutual Finance Ltd [1971] 1 CHD 949.
42
Hayton, D, supra, note 38 at page 473.
43
Ibid, at page 478 – section 65 of the Lands and Deeds Registry Act excerpted under section 6.0 has
altered the common law position. A mortgage does not operate as a transfer or lease of the estate or
interest thereby mortgaged.
44
Ibid, at page 479.

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6.3.9 Appointment of Receiver

This is the appointment of a person with management powers who may collect
rents and profits and although appointed by the mortgagee is in fact an agent for
the mortgagor.45 Such a remedy is most commonly used where the mortgagor has
leased the property and rents and profits can thereby be intercepted.

6.3.10 To Sue For Money After The Date Fixed For Payment

A mortgagee may sue for the money lent. This is like any other contract where
money is lent and there is default.46

6.4 Discharge of Mortgage

Once the monies and interest secured by a mortgage (legal mortgage) have
been paid, the Mortgage has to be discharged. Section 67 of the Lands
and Deeds Registry Act47 provides how the discharge of a mortgage
should be effected. The section provides that:-

(1) Upon production of any memorandum by endorsement on the

mortgage or otherwise, signed by the mortgagee and attested by a
witness discharging the land, estate or interest from the whole or part
of the principal sum or annuity secured, or discharging any part of the
land comprised in such mortgage from the whole or any part of such
principal sum or annuity, the Registrar shall make an entry in the
Register and on the outstanding instrument of title, noting that such
mortgage is discharged wholly or partially.

(2) Upon such entry being made, the land, estate or interest mentioned or
referred to in such memorandum shall cease to be subject to or liable for
such principal sum or annuity, or for the part thereof noted in such
entry as discharged.

(3) The outstanding document creating the mortgage so wholly or partially

discharged as aforesaid shall be surrendered to the Registrar to be
cancelled or part cancelled, as the case may be, unless the Registrar sees
reasonable cause to dispense with such surrender.
(4) A mortgage subject to a sub-mortgage shall not be discharged, nor shall
the terms thereof be varied, nor shall the power of sale contained or
implied therein be exercised without the consent in writing of the sub-

45
Ibid., at page 473.
46
Ibid.
47
Chapter 185 of the Laws of Zambia.

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 mortgagee.

(5) The consent of the sub-mortgagee to the variation of the terms of a

mortgage shall render the instrument making the variation binding on
him and on all persons who may subsequently derive from him interest
in the mortgage.

6.5 Case Law

(a) Nature of a Mortgage - Meaning of a ‘Clog’ or ‘fetter’ on A Mortgagor’s Equity of Redemption.

SANTLEY v WILDE [1899] CH 474

LINDLEY M.R. The question raised on this appeal is extremely important: I do not profess to be able to decide it on
any principle which will be in harmony with all the cases; but it appears to me that the true principle running through
them is not very difficult to discover, and I think that it can be applied so as to do justice in this case and in all other
cases on the subject that may arise. The principle is this: a mortgage is a conveyance of land or an assignment of
chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given. This is
the idea of a mortgage: and the security is redeemable on the payment or discharge of such debt or obligation, any
provision to the contrary notwithstanding. That, in my opinion, is the law. Any provision inserted to prevent redemption
on payment or performance of the debt or obligation for which the security was given is what is meant by a clog or
fetter on the equity of redemption and is therefore void. It follows from this, that “once a mortgage always a mortgage” ;
but I do not understand that this principle involves the further proposition that the amount or nature of the further debt
or obligation the payment or performance of which is to be secured is a clog or fetter within the rule : see Powell on
Mortgages, 6th ed. pp. 116 et seq.: Title, “How a Mortgage is considered in Equity.” The right to redeem is not a
personal right, but an equitable estate or interest in the property mortgaged. A “clog” or “fetter” is something which is
inconsistent with the idea of “security “: a clog or fetter is in the nature of a repugnant condition. If I convey land in fee
subject to a condition forbidding alienation, that is a repugnant condition. If I give a mortgage on a condition that I shall
not redeem, that is a repugnant condition. The Courts of Equity have fought for years to maintain the doctrine that a
security is redeemable. But when and under what circumstances? On the performance of the obligation for which it
was given. If the obligation is the payment of a debt, the security is redeemable on the payment of that debt, that, in my
opinion, is the true principle applicable to the cases, and that is what is meant when it is said there must not be any
clog or fetter on the equity of redemption. If so, this mortgage has no clog or fetter at all. Of course, the debt or
obligation may be impeachable for fraud, oppression, or over-reaching: there the obligation is tainted to that extent and
is invalid. But, putting such cases out of the question, when you get a security for a debt or obligation, that security can
be redeemed the moment the debt or obligation is paid or performed, but on no other terms…

In Re Sir Thomas Spencer Wells48 [Swinburne – Hanham v. Howard], Lord

Hanmworth described the nature or position of a mortgage of land to be thus:-

…The position of a mortgagee of land whether freehold or leasehold is well established. In equity the right of
the mortgagee is limited to the money secured and he holds the land only as security for his money,
therefore although he has the legal estate in the land, yet in equity he has a mere charge for the amount due
to him. In equity the mortgagor is regarded as the owner of the mortgaged land subject only to the
mortgagee’s charge and the mortgagor’s equity of redemption is treated as an equitable estate in the land of
the same nature as other equitable estates. Moreover no agreement between the parties that the mortgage
should not be redeemable has any effect in equity, and any attempt to fetter the equity of redemption with
any other condition than the payment of the money secured is null and void.

48
1933] CH 29 at Page 52.

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 It follows from this relationship between mortgagor and mortgagee that it would be just as unconscionable for
a mortgagee to set up a claim to hold the land comprised in his mortgage free from the equity of redemption
as it would be for a trustee to set up a claim to retain the trust property in his hands for his own use.

(b) Basis of Equity’s Intervention into a Mortgage Contract - Collateral Advantages.

In G. And C. Kreglinger v. New Patagonia Meat and Cold Storage Limited 49

Lord Viscount Haldane explained the basis of equity’s intervention into a
mortgage contract. His Lordship also discussed the rule as to collateral
advantages. The case is excerpted below.

…My Lords, before I refer to the decisions of this House which the Courts below have considered to cover the case, I
will state what I conceive to be the broad principles which must govern it. The reason for which a Court of Equity will
set aside the legal title of a mortgagee and compel him to reconvey the land on being paid principal, interest, and costs
is a very old one. It appears to owe its origin to the influence of the Church in the Courts of the early Chancellors. As
early as the Council of Lateran in 1179, we find, according to Matthew Paris (Historia Major, 1684 ed. at pp. 114—
115), that famous assembly of ecclesiastics condemning usurers and laying down that when a creditor had been paid
his debt he should restore his pledge. It was therefore not surprising that the Court of Chancery should at an early date
have begun to exercise jurisdiction in personam over mortgagees. This jurisdiction was merely a special application of
a more general power to relieve against penalties and to mould them into mere securities. The case of the common
law mortgage of land was indeed a gross one. The land was conveyed to the creditor upon the condition that if the
money he had advanced to the feoffor was repaid on a date and at a place named, the fee simple should revest in the
latter, but that if the condition was not strictly and literally fulfilled he should lose the land for ever. What made the
hardship on the debtor a glaring one was that the debt still remained unpaid and could be recovered from the feoffor
notwithstanding that he had actually forfeited the land to his mortgagee. Equity, therefore, at an early date began to
relieve against what was virtually a penalty by compelling the creditor to use his legal title as a mere security.
My Lords, this was the origin of the jurisdiction which we are now considering, and it is important to bear that origin in
mind. For the end to accomplish which the jurisdiction has been evolved ought to govern and limit its exercise by equity
judges. That end has always been to ascertain, by parol evidence if need be, the real nature and substance of the
transaction, and if it turned out to be in truth one of mortgage simply, to place it on that footing. It was, in ordinary
cases, only where there was conduct which the Court of Chancery regarded as unconscientious that it interfered with
freedom of contract. The lending of money, on mortgage or otherwise, was looked on with suspicion, and the Court
was on the alert to discover want of conscience in the terms imposed by lenders. But whatever else may have been
the intention of those judges who laid the foundations of the modern doctrines with which we are concerned in this
appeal, they certainly do not appear to have contemplated that their principle should develop consequences which
would go far beyond the necessities of the case with which they were dealing and interfere with transactions which
were not really of the nature of a mortgage, and which were free from objection on moral grounds. Moreover, the
principle on which the Court of Chancery interfered with contracts of the class under consideration was not a rigid one.
The equity judges looked, not at what was technically the form, but at what was really the substance of transactions,
and confined the application of their rules to cases in which they thought that in its substance the transaction was
oppressive. Thus in Howard v. Harris,50 Lord Keeper North in 1683 set aside an agreement that a mortgage should be
irredeemable after the death of the mortgagor and failure of the heirs of his body, on the ground that such a restriction
on the right to redeem was void in equity. But he went on to intimate that if the money had been borrowed by the
mortgagor from his brother, and the former had agreed that if he had no issue the land should become irredeemable,
equity would not have interfered with what would really have been a family arrangement. The exception thus made to
the rule, in cases where the transaction includes a family arrangement, as well as a mortgage, has been recognized in
later authorities.
The principle was thus in early days limited in its application to the accomplishment of the end which was held to justify
interference of equity with freedom of contract. It did not go further. As established it was expressed in three ways. The
most general of these was that if the transaction was once found to be a mortgage, it must be treated as always
remaining a mortgage and nothing but a mortgage. That the substance of the transaction must be looked to in applying

49
[1914] AC 25.
50
1 Vern. 33;2 Ch, cas,147.

111
this doctrine and that it did not apply to cases which were only apparently or technically within it but were in reality
something more than cases of mortgage, Howard v. Harris, and other authorities shew. It was only a different
application of the paramount doctrine to lay it down in the form of a second rule that a mortgagee should not stipulate
for a collateral advantage which would make his remuneration for the loan exceed a proper rate of interest. The
Legislature during a long period placed restrictions on the rate of interest which could legally be exacted. But equity
went beyond the limits of the statutes which limited the interest, and was ready to interfere with any usurious stipulation
in a mortgage. In so doing it was influenced by the public policy of the time. That policy has now changed, and the Acts
which limited the rate of interest have been repealed. The result is that a collateral advantage may now be stipulated
for by the mortgagee provided that he has not acted unfairly or oppressively, and provided that the bargain does not
conflict with the third form of the principle. This is that a mortgage (subject to the apparent exception in the case of
family arrangements to which I have already alluded) cannot be made irredeemable, and that any stipulation which
restricts or clogs the equity of redemption is void. It is obvious that the reason for the doctrine in this form is the same
as that which gave rise to the other forms. It is simply an assertion in a different way of the principle that once a
mortgage always a mortgage and nothing else.
My Lords, the rules I have stated have now been applied by Courts of Equity for nearly three centuries, and the books
are full of illustrations of their application. But what I have pointed out shows that it is inconsistent with the objects for
which they were established that these rules should crystallize into technical language so rigid that the letter can defeat
the underlying spirit and purpose. Their application must correspond with the practical necessities of the time. The rule
as to collateral advantages, for example, has been much modified by the repeal of the usury laws and by the
recognition of modern varieties of commercial bargaining. In Biggs v. Hoddinott.51 it was held that a brewer might
stipulate in a mortgage made to him of an hotel that during the five years for which the loan was to continue the
mortgagors would deal with him exclusively for malt liquor. In the seventeenth and eighteenth centuries a Court of
Equity could hardly have so decided, and the judgement illustrates the elastic character of equity jurisdiction and the
power of equity judges to mould the rules which they apply in accordance with the exigencies of the time. The decision
proceeded on the ground that a mortgagee may stipulate for a collateral advantage at the time as a term of the
advance, provided first, that no unfairness is shewn, and secondly that the right to redeem is not thereby clogged. It is
no longer true that, as was said in Jennings Vs. Ward,52 “ a man shall not have interest for his money and collateral
advantage besides for the loan of it.”
Unless such a bargain is unconscionable it is now good. But none the less the other and wider principle remains
unshaken, that it is the essence of a mortgage that in the eye of a Court of equity it should be a mere security for
money, and that no bargain can be validly made which will prevent the mortgagor from redeeming on payment of what
is due, including principal, interest, and costs. He may stipulate that he will not pay off his debt, and so redeem the
mortgage, for a fixed period. But whenever a right to redeem arises out of the doctrine of equity, he is precluded from
fettering it. This principle has become an integral part of our system of jurisprudence and must be faithfully adhered to.
…We are considering the simple question of what is the effect on the right to redeem of having inserted into the formal
instrument signed when the money was borrowed an ordinary commercial contract for the sale of skins extending over
a period. It appears that it was the intention of the parties that the grant of the security should not affect the power to
enter into such a contract, either with strangers or with the appellants, and if so I am unable to see how the equity of
redemption is affected. No doubt it is the fact that on redemption the respondents will not get back at their business as
free obligation as it was before the date of the security. But that may well be because outside the security and
consistently with its terms there was a cotemporaneous but collateral contract, contained in the same document as
constituted the security, but in substance independent of it. If it was the intention of the parties, as I think it was, to
enter into this contract as a condition of the respondents getting their advance, I know no reason either in morals or in
equity which ought to prevent this intention from being left to have its effect…’

(c) Equitable mortgage – Creation – Short comings of Equitable Mortgage- need for a caveat in order
to protect one’s interest in land.

Magic Carpet Travel And Tours Ltd V Zambia National Commercial Bank Limited [1999] ZR 61 (Hc)

51
[1898] 2 CH 307.
52
[1705] 2 Vern. 520.

112
In Magic Carpet Travel and Tours Limited Vs Zambia National Commercial
Bank Limited, the defendant bank created an equitable mortgage with a third
party. Thereafter, the third party fraudulently obtained a duplicate certificate of
title and the property was in due course assigned to the plaintiff. The defendant
registered a caveat on the property as an intending mortgagee. The plaintiff
applied for its removal. The case is excerpted below;

Silomba J. By an originating Summons the plaintiff, Magic Carpet Travel and Tours Limited, has applied for the
following reliefs:-

(a) An order to secure the removal of the caveat placed on stand number 5633, Lusaka, by the defendant,
Zambia National Commercial Bank Limited; and
(b) An order for the Registrar of Lands and Deeds to cause to be registered in the Lands and Deeds
Registry an order withdrawing the caveat from stand number 5633, Lusaka….

The issues that arise from the affidavits both in support of and in opposition to the originating summons, as well as,
from the oral submissions of the learned legal counsel, are three:- The first one related to the acquisition of the stand
by the plaintiff without notice of fraud and the consequences of such an acquisition. The second issue is whether or not
the entry of a transfer of land in the register before a caveat is registered is valid; and thirdly, the significance of an
equitable mortgage and the risks involved.

From the facts of the case, it is not in dispute that Major Richard Kachingwe entered into mortgage arrangement with
the defendant to secure some money. The only collateral he provided was a certificate of title to Stand Number 5633,
Lusaka thereby creating an equitable mortgage between the defendant and himself. It is also not in dispute that Major
Kachingwe fraudulently assigned the stand to S.N. Patel and S.H. Patel through the use of a duplicate certificate of title
with he obtained on the pretext that the original certificate had been lost when in fact this was not the case. The fraud
becomes even more serious if the issue of a duplicate title was not preceded by an advertisement….On the last issue
of an equitable mortgage, the position at common law is that once a borrower has surrendered his title deed to the
lender as security for the repayment of a loan, an equitable mortgage is thus created; the borrower, in such a
relationship, cannot deal with the land without the knowledge and approval of the lender whose interest in land takes
precedence. One of the shortcomings of an equitable mortgage is that it is not registered in the Lands and Deeds
Registry as an encumbrance against the land; the relationship between the lender and the borrower is one that is
based on mutual trust between the two.

The lesson flowing from the present case is that an equitable mortgage is open to abuse; in cases of fraud, an
equitable mortgage cannot, of itself, provide sufficient security for the repayment of the loan. With the decline in the
economic fortunes, the majority of borrowers have a tendency for dishonesty. To counteract the dishonesty, any
potential mortgagee is strongly advised to take advantage of Section 76 of the Lands and Deeds Registry Act by
registering a caveat against a mortgaged property as a matter of routine.

(d) Mortgagee’s Remedies – Mortgagee’s remedies are cumulative – Equity’s interference with contractual rights of a
Mortgagee.

S. Brian Musonda (Receiver Of First Merchant Bank Zambia Limited (In Receivership) V Hyper
Food Products Limited, and Two Others [1999] ZR 124 (SC)
[The facts of the case appear from the judgment of the Supreme Court delivered by Ngulube C.J, as he then
was]

113
The appellant was the receiver of First Merchant Bank Limited which we were informed has since gone into
liquidation. The third respondent borrowed a sum of K500 million on a facility from First Alliance Bank
(Zambia) Limited. At the request of one Ibrahim Sildky Yusuf who appears to have been in total control of all
the respondent companies, First Merchant Bank agreed to guarantee the loan borrowed by the third
respondent from First Alliance Bank. By their letter of guarantee dated 17th January 1997, First Merchant
Bank undertook to repay a sum of up to K 500 million only in the event that the third respondent failed to pay
the same by 30th June 1997. The possible exposure of First Merchant Bank was in turn secured by equitable
mortgages over two properties belonging to the first and second respondents respectively which were offered
as security for the indebtedness of the “sister” company. The third respondent defaulted and First Merchant
Bank duly paid First Alliance Bank the K500 million upon their guarantee. This was done by banker’s
cheques whose amounts were then debited to the overdrawn account of the third respondents. The third
respondents, as the principal debtors, failed to pay and First Merchant Bank fell back upon the securities
which had been offered by the Sureties, that is to say, the properties of the first and second respondents.
The appellant commenced a typical mortgage action brought by a mortgagee: He asked for the payment of
the money secured by the equitable mortgages;
foreclosure; sale; delivery up of possession: and further or other relief deemed appropriate by the Court. The
mortgagee’s remedies are truly cumulative; leaving aside the fact that an equitable mortgagee’s remedies
are somewhat more restricted than those of a legal mortgagee. Thus, by consent of the parties, the
Honourable Mr. Justice Kakusa made an order on 20th May 1998 requiring the respondents (as defendants)
to pay to the appellant (as plaintiff) a sum of K939,401,703.96 (accumulated principal and interest), together
with interest at 70% per annum from 2nd February 1998 until payment and that such money be paid within a
period of sixty days. It was also ordered that the defendants deliver possession of the mortgaged properties
being stands 4514 and 4515 Lusaka. In default of payment within sixty days, it was ordered that the plaintiff
be at liberty to exercise their right of foreclosure over or to sell the properties the subject of the equitable
mortgages in order to recover all outstanding sums of money”. The appellant was also granted leave to issue
a writ of possession. We have quoted the terms of the consent order in order to underline the fact that the
mortgagee’s remedies are cumulative. However, they are also in the main alternative to each other. Some of
the terms of the consent order were liable to mislead if not properly construed, for instance the reference to
foreclosure and sale in one breath. Foreclosure and sale are two distinct and separate remedies though
admittedly both are remedies primarily for the recovery of capital in contradistinction with the taking of
possession or the appointment of a receiver which are remedies primarily for the recovery of interest. A
foreclosure decree absolute extinguishes the equity of redemption and vests the mortgagor’s entire interest
in the property in the mortgagee so that the mortgagor’s property belongs to the mortgagee absolutely. Sale
on the other hand is usually more appropriate where the property mortgaged is worth substantially more than
the mortgage debt. We mention some of these things only in passing since, as will appear they were
peripheral to the central issues raised, although not entirely irrelevant in considering the circumstances of
this case. In the course of the hearing before us, we heard submissions on behalf of the appellant suggesting
that if the mortgagee were to sell the properties concerned (which were said to be worth some US dollars
three million) there would be no obligation to realise a proper price. Megary’s Manual of the Law of Real
Property, 6th Edition, was cited as authority for this startling proposition. A proper and fuller reading of the
passage concerned is infact to the exact opposite effect. Megarry puts it this way, at pages 477 to 478 under
the sub-heading “Mode of Sale”

“The mortgagee is not a trustee for the mortgagor of his power of sale, for the power is given to the
mortgagee for his own benefit to enable him the better to realise his security. Thus he need not
delay the sale to obtain a better price, nor does he have to attempt to sell by auction before selling
by private contract. Moreover, his motive for selling, such as spite against the mortgagor, is
immaterial. But the sale must be a true sale; a “sale” by the mortgagee to himself, either directly or
through an agent, is no true sale and may be set aside. Further, a mortgagee is under a duty to
take reasonable care to obtain a proper price, so that he will be liable to the mortgagor If he
advertised the property for sale by auction without mentioning a valuable planning permission, so
that the sort of purchaser likely to pay a high price for land with such permission failed to attend the
auction.”

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Again in an earlier edition, the 4th edition of the Law of Real Property by Megarry and Wade the learned
authors expressed themselves thus at pages 911 to 912 under the subheading “no trusteeship”….
“The mortgagee is not a trustee for the mortgagor of his power of sale, for the power is given to the
mortgagee for his own benefit to enable him the better to realise his security. But the mortgagor is the person
interested In the proceeds of sale in so far as they exceed the debt, and his interests must not be sacrificed.
The mortgagee is accordingly required to act not only in good faith but also with reasonable care. If he
advertises the property without mentioning that the land has valuable planning permission he will be
accountable to the mortgagor for the difference between a proper price and the price obtained. It has been
held that he need not advertise the property, or attempt to sell by auction before selling by private contract, or
delay a sale so as to obtain a better price, since he is entitled to proceed to a forced sale. His motive for
selling, too, such as spite against the mortgagor, has been held immaterial. The House of Lords has even
upheld a sale for the exact amount of money due under the mortgage, with costs; but In that case there was
no evidence of negligence or undervalue, and the mortgagor delayed for four years before acting. Now that
the Court of Appeal has firmly put the law upon the footing that the mortgagee’s duty is to take reasonable
care to obtain a full price, some of the earlier decisions may need reappraisal, particularly those which
suggest that the only duty Is to act in good faith and avoid recklessness. The law as now clarified accords
with that laid down by statute for building societies, which when selling as mortgagees must take reasonable
care to ensure that the price Is the best reasonably obtainable.”
Paragraph 726 of Halsbury’s Laws of England 4th Edition, Volume 32, also tells us that there is a duty to
obtain a proper price and an obligation to take reasonable precautions to secure a proper price which has
been fixed with due regard to the value of the property. The various authors of the “Megarry” series and of
Halsbury’s Laws all cite authorities with which it is not easy or even necessary to quarrel. In England at any
rate, if not here also by default, Order 31 of the Rules of the Supreme Court (see 1999 White Book) directs
that the best price that can be obtained be realised. Colourable sales and sales at a gross undervaluation by
receivers, mortgagees, Judgment creditors and the like are liable to be set aside by the courts where an
obvious injustice or fraud on the debtor or surety is manifest. We digressed. The real issues here stemmed
from an order subsequently made by a second Judge – Honourable Madam Justice Chibomba - to allow the
debt to be paid by monthly instalments of K80 million, we understand that the first Judge was indisposed at
the time. There were prior attempts which were unsuccessful to set aside the consent judgment. There was
even an order again by consent that only the principal amount of K500 million was to be paid into court within
sixty days from 13th August 1998, with liberty to the plaintiff to levy execution if payment was not made. As
for the balance of the money award earlier made, this was stayed pending appeal to this court.
No appeal has infact been lodged or prosecuted by the debtors and it was agreed during the hearing before
us, if we understood correctly, that the whole sum of nine hundred plus million kwacha and interest is
payable.
From the affidavits filed below, it was clear that the appellant had since advertised the properties for sale and
was anxious to sell so as to recover the money which was said to have shot up to K 1.6 billion. The debtors
on the other hand were anxious that the properties - which were worth far more and were earning handsome
rents from tenants of substance - should not be lost when the debtors were in a position to pay off the debt
by reasonable instalments over a period of time. We should observe, again in passing, that the appellant
selected the remedy of sale of the sureties’ mortgaged property and sought to proceed therewith without
supervision of the court, that is, without obtaining an order and directions as (usually) required in a mortgage
action: See e.g. White Book 1999 Ed. Order 31 and paragraph 893 of Halsbury’s Laws of England, Volume
32, 4th Edition. At the time of the application for payment by instalments, the debtor’s contended that the
judgment for the payment of K939, 401,703.96 with interest, (in default of which there were also ordered the
alternative remedies of a mortgage action was nonetheless a judgment or order directing the payment of
money within the terms of Order 36 of the High Court Rules which permits payment by instalments where
this is defensible and warranted. Counsel for the debtors also contended - relying on Order 88 in the White
Book - that the giving of time was competent even where there had been an order for possession so that a
judgment for the other orders in a mortgage action can be stayed or suspended for such period as the court
thinks reasonable to give chance to the mortgagor to pay. Counsel for the mortgagee argued forcefully
against the application, indicating that the judgment creditor/mortgagee preferred foreclosure or immediate
sale.
The question in this appeal is whether it was wrong to allow repayment by instalments in what was termed a
“mortgage action’. We are mindful that there was in this case no ordinary mortgage of the usual kind where
borrowed money is repayable by instalments of principal and interest secured over the mortgagor’s property.

115
 In this case, First Merchant Bank was a guarantor or surety of the third respondent while the first and second
respondents were the sureties of the surety. We heard submissions setting forth what remedies are available
to a mortgagee under the law and as set out in the rules of court, including our own High Court Rules, Order
30. We do not consider that there can be much difficulty with the propositions of law so discussed but can
see the danger of misapprehension when the remedies of a mortgagee are said to be cumulative. The
submission by counsel for the appellant boiled down to the proposition that the rules of court and the general
law do not envisage payment by instalments in a mortgage action. It was argued that where the lending was
secured, the mortgagee should not have his other remedies - such as foreclosure or sale - shut out by a
court and such mortgagee should have unfettered liberty to enforce his security, it was said that even if the
equity of redemption is available to the mortgagor, it should not enable a defaulting mortgagor to remain
indebted indefinitely. It was pointed out that in this case, the sum of K500 million was to be paid within a
short time. With interest, it had risen to a very large sum and even though K240 million had been paid and
taken out as at the time of the hearing before us- it was wrong to shut out the other remedies and to confine
the mortgagee to accept only the repayment of the money. It was said that the mortgagee should be free to
select one or all of his cumulative remedies at once. The complaint was that the second judge tied down the
appellant to one only of the remedies awarded by the first judge. It was pointed out that the first judge had
given time to the debtors and they had failed to pay the whole of the amount due within such time.
We will proceed as if this were indeed a mortgage action as contemplated by our rules. We say this because
the Court of Appeal in England has suggested that facts like those here may after all not qualify to be a
mortgage action. Thus in Order 88/1/2, under the subheading “payment of moneys secured by the mortgage”
(the whole Order 88/1 being almost the same as our High Court Rules Order 30 Rule 14) the White Book
(1999 edition) notes as follows
“In National Westminster Bank v Kitch53, it was held, contrary to the previous understanding of the rule, that a
claim to payment of money secured by a mortgage only falls within the definition in r.1(1)(a) if the plaintiff is
relying on the mortgage to make his claim. The mere fact that the moneys claimed are secured by a
mortgage does not of itself bring the action within the definition. The effect of this decision is that an action by
a bank for payment of an overdraft, even if secured, is not a “mortgage action” and is outside Order 88
because the obligation to pay does not arise under the mortgage. Therefore, such claims can be brought in
the QBD and judgment in default can be entered without leave.” The Court of Appeal was in that case
concerned with an ordinary overdraft on current account. Presumably a claim by a bank for repayment of a
home purchase loan is still within 0rder 88 even if the bank could frame its case without referring to the
mortgage securing the loan. As already indicated, we leave the point open and proceed, as did the court
below and the parties, as if this were truly a mortgage action. The judgment of the first judge and made by
consent of the parties was indisputably for the payment of money in default only of which within the time
allowed the other remedies were also awarded. To that extent, it was plainly a judgment well within the terms
of the rule which permits payment by installments. We agree that the discretion of the court must be
exercised judicially on sound considerations which would enable the judgment creditor to realise the fruits of
success in the action within a reasonable time. What is a reasonable time is a question of fact in the
circumstances of each case. Here, the learned second judge made an order which would enable K 500
million to be paid within seven months. If the whole of the amount plus interest including the balance not
infact appealed were paid on the same basis, the period would still not become “unreasonable’. The
complaint here was that the second learned judge effectively shut out the alternative remedies. We do not
read the ruling in this way and we are satisfied that the other remedies were simply postponed or suspended.
The sureties were in effect given a more realistic opportunity to pay. In the exercise of its equitable
jurisdiction, the court has long been entitled to interfere with the contractual rights of the mortgagee to the
extent of enlarging time even where there is foreclosure (see for example paragraph 903 of Halsburys Laws
of England, 4th Edition, Volume 32) or suspending orders for possession or postponing the alternatives if
there are reasonable prospects that the moneys due can be paid within a reasonable time (See generally the
discussion in the various notes under Order 88 in the White Book, 1999 edition.)
We have not lost sight of the passionate appeal to the courts not to give comfort to defaulting debtors. We
are alive to the needs of commerce and the desirability of effective and speedy remedies for the recovery of
debts. However, the position here is that the claimant was in receivership and is now under liquidation. The
depositors and creditors have a good chance of seeing their money recovered from these debtors who were
guarantors within a relatively reasonable time without squeezing and consigning the respondents into a

53
[1996] 1 WLR. 1316, [CA].

116
 similar fate. We have also borne in mind what counsel on both sides confirmed, namely, that the debtors
have been paying into court K8O million per month and the judgment creditor has been duly retrieving such
moneys. It is not contrary to law nor to the rules for the court to exercise its equitable jurisdiction of affording
relief where a judgment debtor can pay within a reasonable time even if this results in fettering the judgment
creditor’s freedom of inflicting a remedy of their own choice or preference in a mortgage action. The second
learned judge did not exercise her discretion so wrongly or so improperly that we should feel constrained to
reverse her.
In sum, the appeal is unsuccessful.

(e) Duty of Mortgagee to obtain the best possible price or true market value of the property - Statutory power of
sale without recourse to Court –Where the power of sale is exercised through a Court order then an
account of sale has to be made through the Court by means of Summons for an Account to be rendered.

Finance Bank Limited V Africa Angle Limited, Ibrahim Yusuf Sildky And Yvonne Phoebe Jedburgh Yusuf
(1998) ZR 315.

[ The facts appear in the judgment of the Supreme Court which was delivered by MUZYAMBA J.S.].

For convenience we shall refer to the appellant as plaintiff and to the 1st, 2nd and 3rd respondents as 1st,
2nd and 3rd defendants for that is what they were in the court below.
This is an appeal against a High Court decision ordering revaluation of the mortgaged properties which have
since been sold, an account to be rendered and a stay of execution.
Briefly, the facts of this matter are that the second defendant is a director of the first defendant. The first
defendant obtained a loan of K368,660,07500 for procurement of 11 brand new Toyota Hilux double cabin
vehicles, one brand new Mercedes Benz 5500 series and two Nissan Mini buses. As a security for the
repayment of the loan the 3rd defendant mortgaged his properties known as subdivisions 10 and 107 of farm
number 396a, Lusaka. The first defendant failed to repay the loan as agreed and the plaintiff took out
originating summons for the repayment of the loan and interest, vacant possession and delivery of the
mortgage properties so that it could exercise its power of sale under the mortgage deed. On 27th September,
1995, the court approved a consent judgment filed by the parties. The judgment at pages 50-51 of the record
of appeal reads as follows:

“Upon hearing Counsel and by Consent of the parties hereunder signified:

1. IT IS HEREBY ADJUDGED THAT the plaintiff do recover from the
Defendants the sum of five hundred and sixteen thousand Five hundred
and four United States Dollars and fifty eight cents (US$5 16,504-58).
2. IT IS HEREBY ORDERED that the full judgment debt be payable in the United States Dollar currency and
should be settled in any event by the Defendants within three months from the date of this judgment.
3. IT IS FURTHER ORDERED that should there be a default by the Defendants for any reason in settling the
full judgment debt within three months from the date of this judgment, then the Plaintiff will be entitled
forthwith to the relief of foreclosure and be at liberty to take possession or in the alternative exercise its
power of sale of Subdivision Number 107 of Farm Number 396a, Lusaka respectively.
4. Costs of these proceedings will be borne by the Defendants.”

There then followed execution for possession and sale of the properties and a further execution for the
balance of the judgment debt and an application by the defendants for setting aside of execution wrongly
done and revaluation of the properties to determine their true market value and for an account to be rendered
of the sales. The learned trial judge granted the application and the plaintiff now appeals to this court. The
appeal is on three grounds that the lower court erred by:

1. Ordering a re-valuation of the two properties sold by the appellant as mortgagee pursuant to a Consent
judgment as such a re-valuation would not be true, fair or realistic because:

117
 (a) A valuation can never be retrospective and is not in the interest of justice.
(b) Over one year had elapsed since the properties were sold and property market prices have since
escalated in the country.
(c) The properties have since been re-developed and improvements added thereon by their new owner.

2. Ordering a re-valuation of the properties as the prices obtained were the best or highest prices prevailing
on the open market in that the appellant owed a duty not only to the Mortgagor but also to itself to reduce the
judgment debt as far as possible and that this the appellant did by advertising the properties by public tender
through estate agents and obtaining valuation reports; no evidence was adduced by the respondents to
prove otherwise.

3. Staying Execution and Setting aside the Writ of Fieri Facias as no leave of Court for execution was
required in the circumstances and as the appellant had adequately accounted to the respondents on the sale
of the properties and the balance due on the Judgment debt….We will now deal with the arguments on
grounds 1 and 2. It was argued by Mr. Roberts that the order of revaluation was not in the interests of justice
because the properties were sold a year ago and improvements have been made to the properties. Further,
that a valuation can never be retrospective. Moreover that no evidence was adduced by the defendants that
the properties were under valued or that the prices obtained were inadequate. On the contrary, that the
properties were advertised for sale, tenders and valuation reports obtained, though there was no obligation
on the part of the plaintiff to obtain any valuation. That in the exercise of its duty as a mortgagee the plaintiff
obtained the best possible prices for the properties. On the duty of a mortgagee to obtain the best possible
price he referred us to a number of cases. And Mr. Yangailo’s argument was simply that the court ordered a
re-valuation of the properties at the time of sale and that it has not been shown that it is impossible to get a
valuation of the properties at the time of sale. Further, that the cases cited by Mr. Roberts were
distinguishable from the present case.
We will now consider the authorities cited. In Standard Chartered Bank v Walker,54 it was held by Lord
Denning that if a mortgagee enters into possession and realises a mortgaged property it is his duty to use
reasonable care to obtain the best possible price which the circumstances of the case permit. In our view the
best possible price must mean true open market value. In that case, a receiver appointed by the mortgagee
sold the assets of the mortgagor to meet the debt. The amount realized was not enough to pay off the
overdraft. In Cuckmere Brick Company v Mutual Finance, 55 a piece of land mortgaged for 50,000 pounds
and for which planning permission was obtained to erect 100 flats and subsequently another permission
given to erect 35 houses was sold by the mortgagee through auctioneers for 44,000 pounds because the
auctioneers forgot in their advertisement to mention the planning permission for the erection of flats. The
mortgagor claimed 77,000 pounds as value of the land. The learned trial Judge found the value of the land to
be 65,000 pounds and ordered accounts and inquiries to be made. On appeal it was held by Lord Bowen and
Lord Fry that it was the duty of a mortgagee when realising the mortgaged property by sale to behave as
though he was selling his own property so that the mortgagor may receive credit for the value. We
respectfully agree with their decision. In James Daka v Shantilah Bhulabhai Patel and Zambia State
Insurance Corporation Limited,56 the appellant mortgaged his property, Stand No. 4512 Northmead, Lusaka
to Zambia National Commercial Bank and Zambia State Insurance Corporation, the second respondent.
When he fell in repayment arrears the property was sold to pay off both mortgages. Initially the first
respondent put up a tender which was less than the amount of the two mortgages. His tender was accepted
on condition that he increased the offer to pay off both Mortgages. This he agreed -and the mortgages were
paid off for a total of K397,369-67. A year later the appellant obtained a valuation for KI ,000.000 and argued
that the property should have been sold for that amount, This court held, at page 6:

“In this case, in order to prove that the price obtained for the property was in some way
inadequate, it was not sufficient to produce a valuation report dated 10 February, 1989, in respect
of property which was contracted to be sold in January, 1988. As the learned trial Judge
commented in his judgment, at the relevant period there were dramatic increases in the price of

54
[1982] 3 ALL. ER 938.
55
[1971] 1 CHD 949.
56
(1995 – 1997) ZR.108.

118
 property and without evidence that in or about January, 1988, the price realised was too low, the
appellant’s claim in this respect cannot be supported.”

That case, as Mr. Yangailo rightly submitted is distinguishable from the present case in that the defendants in
this case sought revaluation of the properties at the date of sale and the court so ordered. The order at page
8 of the record reads:

“As regards valuation by an independent valuer, I also grant the defendants the order they seek in
that regard. I do not understand the parts in the judgments of the cases cited to me by Mr. Roberts
to mean that property cannot be revalued. The fact that the properties have been sold is
immaterial. If the properties have not been demolished it is easy to trace its value at 1995
conditions. Of course only improvements made to the properties will be deducted. Before the
plaintiff could account to the defendants and before coming to court it was unfair for the plaintiff to
issue a writ of fifa against the defendants. The plaintiff was to recover his monies from the
mortgaged property and the plaintiff had to take all reasonable steps to see that he recovered his
money from the properties. For instance, the plaintiff could have put the properties on rent first
before selling the properties. The defendants reaction to the plaintiff’s action, I think is quite natural.
They must be thinking that the plaintiff wants to economically ruin them. For the reasons I have
given above I set aside the Writ of Fifa pending the execution of the orders to account and to value
the properties.”

Moreover, in James Daka the sale paid off the mortgages whereas in this case only an amount of
K215,500,000 was realised and we do not understand how properties which were found to be sufficient
securities for the loan of K368,660,075 at the time of borrowing in 1994, could cost less two years later
especially so in the absence of evidence that market values had fallen over the years. Further, we do not see
the propriety of expressing a loan which was disbursed in Kwacha into dollar in the Consent Judgment. This
was certainly disadvantageous to the defendants.
In Warner v Jacob,57 the mortgagor brought an action against the mortgagee and purchaser of the
mortgaged property to set aside the sale on the ground that the property was sold for less value. It was held
that if a mortgagee exercises his power of sale bona fide for the purpose of realising his debt and without
collusion with the purchaser, the court will not interfere even though the sale be very disadvantageous,
unless the price is so low as in itself to be evidence of fraud. We respectfully agree with this decision.
However, that case is distinguishable from this case in that the defendants are not seeking to set aside the
sale but to establish the true market value of the properties at the time of sale.In the circumstances of this
case we do not agree with Mr. Roberts that the order of the court below was not in the interests of justice. It
certainly was. The appeal would therefore fail on these grounds. As regards ground 3, the learned trial Judge
stayed execution and set aside the writ of execution for the balance of the judgment debt pending re-
valuation of the properties and an account to be rendered of the sales. This ground is dependant upon the
first ground and the first ground having failed this ground must also fail. We wish to add, however, that a
statutory power of sale under a mortgage deed is usually exercisable without recourse to Court and where it
is exercised by or through a court order then an account of the sale has to be made through the court by
means of summons for an account to be rendered. The appellant ought therefore to have taken out
summons to render an account to the defendants of the sales before levying execution for the balance of the
judgment debt. The learned trial judge was therefore right in staying execution and setting aside the Fifa.

(f) The mortgagee has a duty to account after the sale of a mortgaged property.

In Modern Jacks Suppliers Ltd V. Strong Engineering Ltd And George

Sokota(Suing As Liquidation Manager Of Africa Commercial Bank
Zambia Ltd.),58 on an appeal against the High Court’s refusal to set aside
an order of sale of the mortgaged property, the Supreme Court (Chirwa JS

57
[1882] 20 Ch. D. 220.
58
Supreme Court Appeal No. 50 of 2001 [unreported].

119
 who delivered the judgment of the Court) observed and commented
thus:-

…The second ground of appeal was that the court fell into error by dismissing the appellants’
application to set aside the order of sale and to make enquiries and ascertain the amount lawfully
due to the respondent. In considering this application, we note from the summons for setting aside
the order of sale that there was a prayer for an account to be made in this matter to ascertain the
amount due to the mortgage. This prayer was never considered by the learned trial court and no
decision was made. We agree that where a mortgagee exercises his right of sale and that there
had been some payments and a sale has in fact taken place, the mortgagee must account to the
mortgagor the total sum paid under the mortgage and proceeds from the sale. This was not done
here. We would allow this ground of appeal and order that the respondent must account to the
appellants on the mortgage i.e. the payments made on the mortgage; the principal outstanding
before the respondent went under…

(g) Sale of mortgaged property – Statutory power of sale – A mortgagee in exercising his statutory power of sale
is not required to proceed to Court under Order 30 Rule 14 of the High Court Rules -Chapter 27 of the Laws
of Zambia.

Investrust Merchant Bank Limited And Simbeye Enterprises V Ebrahim Yousuf – [Scz No. 4 Of 2004] Appeal
No. 85a/2002 [Unreported]

[The facts appear from the Judgment of the Supreme Court delivered by Chibesakunda, JS,]

…This is an appeal against a ruling of the High Court dated 3 rd April 2002. The Appellants in the main
application had applied to discharge the caveat lodged by Yousuf Issa on Stand No. 16835, situated in the
Lusaka Province of the Republic of Zambia. The court, on 16th June 1999, granted that application.
The history of this cause of action thereafter is embedded in a series of applications and counter
applications, thus making rather confused record of the proceedings more or less casting a shadow on the
administration of justice as we know it. We will outline these proceedings to show this confusion and also to
enable us to adequately address the issues in this appeal.
The facts before the High Court were that, the Respondent, in order to facilitate a loan between Cotmark
Limited of K200, 000, 000 .00 and the 1st Appellant, by a third party mortgage, on 23rd April 1998 pledged
his property, Stand No. 16835, situated in the Lusaka Province of the Republic of Zambia, as security.
Consequently, an endorsement of this charge was duly inserted on the title deed of this property. Cotmark
Limited defaulted in settling this loan. In line with Clause 7 of the mortgage deed, the 1st Appellant
demanded settlement of the loan in question.

The first letter of demand is dated 9th November 1998. It reads:

“1MB/CR DEPT/DH/mz
9th November 1998
Mr Ebrahim Yousuf
c/o Cotmark Limited
P.O. Box 30778
LUSAKA

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Dear Sir
Notice of determination of guarantee in favour of Cotmark Limited K185,639,376.16 as at 8.11.98. We refer
to the above captioned subject. Please be advised that Cotmark Limited have failed to repay the outstanding
debt in our books despite our several reminders.
In this vein therefore we are now calling upon you as guarantor to settle this outstanding debt together with
accrued interest thereon within fourteen (14) days hereof.
Meanwhile, in terms of paragraph 3 (b) of the mortgage you signed in favour of the bank, we hereby notify
you that the Bank has decided to remove you as a trustee and in your place have appointed Mr Olivet Sikes
Malungisa of Investrust Merchant Bank Zambia Limited, Afe House, P.O. Box 32344, Lusaka. The said Mr
Malungisa will sell the property if you do not redeem the debt within the next fourteen (14) days.
Yours faithfully
INVESTRUST MERCHANT BANK ZAMBIA LIMITED
R.W. Taylor
MANAGING DIRECTOR”
The second letter is dated 30th November 1998. The third letter is dated 9th December 1998 and the fourth
letter is dated 14th December 1998. All these letters gave notice to the Respondent that the mortgagee
intended to sell the property if the Respondent failed to liquidate the loan involved as agreed.
According to the affidavit evidence and also the evidence from these letters, the Respondent had partially
liquidated the loan. The last letter dated 14th December 1998 says:
“1MB / CR DEPT/DH/mz
14 December 1998
Mr Ebrahim Yousuf
c/o Cotmark Limited
P. 0 Box 30778
LUSAKA
Dear Sir
FINAL LETTER OF DEMAND
We acknowledge receipt of a sum of K57,485,000 (Fifty Seven Million, Four Hundred and Eighty Five
Thousand Kwahca only) being part payment aimed at settling the Cotmark debt in our books. This has
reduced the outstanding amount to K140,427,576.57.
We wonder what has become of the sale of your three properties in Chipata proceeds of which were meant
to pay-off this debt. We were advised by you approximately three weeks ago that the sale was imminent. We
believe the Bank has been extremely indulgent so far but has decided to give you final notice that unless the
debt is fully settled by Wednesday, 16.12.68, we shall have no option but to proceed with the sale of your
Freedom way property without further notice.
Please be advised accordingly.
Yours faithfully
INVESTRUST MERCHANT BANK ZAMBIA LIMITED
R.W. Taylor
MANAGING DIRECTOR”

On 15th December 1998, the 1st Appellants entered into a contract of sale of the property in question with
the 2nd Appellant. At page 88 of the appeal record, a certificate of title was issued in the name of the 2nd
Appellant. Unknown to the Appellants, according to them, on 30th December 1998 the Respondent entered
into a contract of sale of the same property with a person by the name of Yousuf Essa at the price of US
$200,000. Mr. Yousuf Essa then lodged a caveat on the property in question on 31st December 1998. It is
this caveat, which the Appellants sought to discharge against the Respondent before the High Court. This
application was by originating summons supported by affidavit evidence. There was an affidavit in opposition
to this application.
Although it was argued inter alia that the caveator was not a party to the proceedings, the High Court, on
16th June 1999, nonetheless ordered the discharge of the caveat as follows:
“Upon hearing Counsel for the Parties, herein, it is ordered that the caveat placed by the Defendant on the
Mortgaged Property, known as Plot 16835, Freedom Way, Lusaka, and sold by the Plaintiff to Simbeye
Enterprises Limited, upon an express power of Sale containing in the Mortgage Deed between the Plaintiff
and the defendant, dated 23rd April, 1998, be lifted, forthwith. The costs of and occasioned by this matter be
borne by the defendant, in any event…”

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 On 27th of July 1999, the Respondent applied for a stay of this order, exparte. The application was granted.
In the same order, there was a further order that the discharge of the caveat be stayed until the Appellants
complied with Order 30 Rule 14 of the High Court Rules (4) or Order 88 of the Rules of the Supreme Court
(6). This said order was returnable on 26th August 1999 as interparte application. Curiously enough, before
the interparte hearing, the Respondent applied exparte to the same Judge for an exparte injunction. On 3rd
September 1999, an injunction was granted exparte pending interparte application returnable on l4th of
September 1999. Before the 14th of September 1999 the Respondent took out a notice for attachment or
committal for contempt of court. Before the court heard this application, the same Respondent took our
originating summons for the same court to determine preliminary issues and questions. These are:
.
1. Whether a mortgagee, in exercising the power or sale under the mortgage, is required to proceed under
Order 30 Rule 14 of the High Court rules and/or Order 88 of the Rules of the Supreme Court.
2. Whether a mortgagee, having exercised its power of sale under the mortgage, can evict a lawful tenant of
the property other than with a writ of possession;
3. Whether a mortgagee, in possession, is required to sell at the best possible price, (a fair and reasonable
valuation), and not just sufficient to realize his debt;
4. Whether on the answers to the above being respectively yes, no and yes any subsequent sale is null and
void.
And that the costs of this application be costs in the cause.

It is worth noting that these applications, orders and counter orders glaringly showed total disregard of well-
entrenched rules of procedure embedded in our system of justice. It is also worth noting that these numerous
applications were entertained by the Judge and the same Judge made these numerous orders causing
confusion. This procedure adopted prima facie made a mockery of justice. In the originating summons for the
court to determine preliminary issues, both parties put in affidavit evidence in support and in opposition.
Beside the facts which are already tabulated in our Judgment, the argument by the Appellants before the
High Court was that according to the mortgage deed, Clause 7 of the agreement and in accordance with
Section 19 of the Conveyance Act , they, as mortgagees, had a right to sell the property in question after the
Respondents failed to discharge their obligation of liquidating the loan, without recourse to court. They
argued that in accordance with the mortgage deed and Section 20 of the Conveyance Act, they had given
notice to the Respondent of their intention to sell the property in question. They explained that the
Respondent had no right of entering into a sale agreement with Yousuf Essa and placing a caveat on the
property in question. He had not obtained their consent as the mortgagees before getting into that
arrangement. According to them, the property sold to the 2nd Appellant was sold for the best price and that
as far as they were concerned, the property had passed to the 2nd Appellants when the Respondent
purported to sell that property to Yousuf Essa.
The Respondent’s arguments before, the High Court were that the sale of the property to the 2nd Appellants
was wrongly done as they were not given the prescribed notice of the intention to sell the property by the
mortgagees . He argued that the mortgagees should have first obtained a court order of vacant possession
before entering into an agreement with the second appellants to sell that property. – Order 30, Rule 14 of the
High Court. It is also their argument that this sale agreement between the 1 st and second appellants was
reached after they had obtained an injunction on 3 rd September 1999 restraining the appellants from going
ahead with the sale of the property and as such the appellants were in contempt of court.

The respondents further argument is that the price of K200 000 000.00 was in his view unjustifiably low and
therefore establishing mala fide on the part of the 1 st appellants in offering to the 2nd appellant the property in
question. They urged the High Court to set aside the purported sale of the property by the 1 st appellant to
the second appellants as void ab-initio. The High Court, as earlier stated, ruled in favour of the respondent
and hence the appeal before us.

The Court below ordered that:

1 A mortgagee in exercisising his power of sale under Mortgage is required to proceed under Order 30
rule 14 of the High Court Rules (4) and/or Order 88 of the rules of the supreme court
2 A mortgagee having exercised its power of sale under the mortgage could evict a lawful tenant of the
property other than with a writ of possession.

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 3 A mortgagee in possession is required to sell at the best possible price ( a fair and reasonable
valuation) and not just sufficient to realize his debt.
4 In respect to the above, any subsequent sale is null and void. The appellants being aggrieved with this
decision now appeal to this court
Before us, Mr. Mutemwa relied on his written heads of argument but highlighted some salient points. He had
two grounds of appeal.

Ground 1 was that the learned trial judge erred in law and fact in holding that the sale of the mortgaged
property by the 1st appellant to the 2nd appellant was null and void, on account inter alia of lack of a court
order as provided under order 30 rule 14 (4). He referred to pages 6-11, 32-43, 56-62, 102-109 and 137-145
and argued that the learned trial judge had in the body of his argument rightly concluded that the 1 st appellant
had properly exercised his power of sale with regards to the mortgaged property, but contradictorily
concluded that the mortgagees should have not sold the property without a court order in accordance with
order 30 rule 14 and/ or order 88 of the rules of RSC.
He explained that on record there was abundant evidence of the respondents repeated failure to redeem the
mortgage and there was also abundant evidence of the notice given to the respondent demanding liquidation
of the outstanding loan within a given period or else clause 7 of the mortgage deed was to be invoked. Citing
the case of Daka v Patel and Zambia State Insurance Corporation Limited,59 he argued that the appellants
acted in accordance with clause 7 , therefore the appellants rightly exercised the power to sell as contained
in the mortgage deed. He conceded however to the suggestion that in clause 7 the parties agreed that the
1st appellant would sell the property in question if there was default in payment within aspecific period without
recourse to the court. He went on to say that looking at the evidence on record, the fact of default in
redeeming the mortgage was beyond question as at no time did the Respondent deny that fact. Even in his
own affidavit in reply to the application to remove the caveat, the Respondent confirmed this default by
saying, “That with regard to the contents of paragraph 6 of Malungisa’s affidavit, I only appeal for the
sympathy of this Honourable Court that the Plaintiff’s power of sale be not at this moment in time exercised
for the reason outlined below”.
Underscoring this point, he went on to submit that, even the tone of the Respondent’s affidavits and letters
on the record was not to deny the failure to redeem the mortgage but to appeal to the Appellants’ conscience
to waive the insistence on him complying with clause 7 of the Mortgage Deed. To demonstrate this point he
quoted the passage from the same affidavit of the Respondent, “That despite the predicament referred to in
sub-paragraph (a) above, I have still managed to pay circa K80,000,000.00 between 3rd December 1998
and now which … I am committed to and can settle the remaining K12 1,955,000.00 of the debt herein …”
This according to him proves that at no time did the Respondent ever dispute that he owed the 1st Appellant
the amount in question, and that the 1st Appellant had the right to sell the mortgage property under Clause 7.
On the point that the 1st Appellants ignored the injunctive order made by the court, restraining them from
selling the property to the 2nd Appellant, Mr. Mutemwa expressed surprise that the court below accepted the
Respondents’ allegations, which were contained in their affidavit in support of the application for contempt of
court, which application was never entertained by the court. According to him, the contract of sale of the
mortgaged property, to the 2nd Appellant, was concluded well before the exparte order for stay or the
injunction, was granted to the Respondent in September 1999.
He further pointed out that even the injunctive order was made well after the transactions between the 1st
and the 2nd Appellants were concluded. He submitted that the date, 7th September 1999, when the
certificate of title was issued to the 2nd Appellant, should not be regarded by this court as the date when the
application was lodged to get these title deeds, as the process to obtain title deeds takes a long time in the
Lands Registry.
On the argument about the purchase price being unjustiflably low, citing the case of Finance Bank Zambia
Limited v African Eagle,60 he canvassed the view that, the authorities of this court on this issue, are that
circumstances in a given case, have to be weighed in order to decide whether or not such a price, was
unjustifiably low. He argued that the K200 000 000 00 was the best price, as the Appellants had advertised
the property, both in the Times and Daily Mail newspapers and K200 000 000 00 was arrived at after taking
into account the responses, the Appellants had from the members of the public. There was no collusion
between the parties in reaching K200 000 000 00 as the best price for the property in question. He went on

59
(1995 – 1997) ZR 108.
60
(1998) ZR 315.

123
 to say that even the price of US $200 000 must not be accepted, as a better offer, because the Appellants
informed the Respondents about their selling the property for K200 000 000 00 on 28th December 1998.
The Respondents on the other hand did not inform the 1st Appellant of their being offered a better deal of US
$200 000 00. Neither did Yousuf Essa inform the 1st Appellant. The Appellants only got to know of this offer
when they discovered the caveat. He, therefore, asked this court to regard this purported better offer
between the Respondents and Yousuf Essa as a smoking gun — a deceptive scheme by the Respondents.
On Ground (2), Mr. Mutemwa argued that the learned trial Judge erred in fact and law by holding that the
caveat was illegally removed. He argued that although it is correct that the person who took out the caveat
was Yousuf Essa and the proceedings were against Ebrahim Yousuf, the learned trial Judge should have
looked at the provisions of Order 15 rule 6 (1)(2) of the Rules of the Supreme Court .
He argued that the court on its own motion should have joined Yousuf Essa as a party to the proceedings.
Referring to the case of London Ngoma and Others v LCM Companv Limited United Bus Company of
Zambia (in liquidation)61 , he pointed out that the court should encourage parties to bring all issues in
controversy to court to be fully adjudicated upon. He argued that it is a well-established principle of law that
no cause of action can be defeated by reason of misjoinder or non-joinder. The court would still at this stage
join Yousuf Essa as a party to the proceedings under Order 15 Rule 6(2) of the Rules of the Supreme Court.
In conclusion he submitted that the 2nd Appellant still has a certificate of title because when the court
granted a stay order, the 2nd Appellant had already lodged his papers before the Lands Commissioner and
that the Lands Registry issued these title deeds to him.
Mr. Yousuf, in responding to these arguments, submitted that the lower court was on firm ground in reaching
the conclusions, which it did. He argued, that the advocates for the Appellants were neither honest nor
earnest in making submissions to us as a court. He firmly denied the Appellants’ assertion that the
Respondent did not, inform the 1st Appellant of the transaction between the Respondent and Yousuf Essa.
He submitted that as learned counsel/officers of the court they are duty bound to bring to court all the
necessary details, and all relevant arguments, which should help the court in reaching a fair decision. He
argued that it was not the duty of the Respondents to disclose to the 1 Appellant about Yousuf Essa’s
caveat. On the other hand, according to him, it took the Respondent several record search in the Registry,
for him to come across the sale agreement between the 1st and 2nd Appellants. He went on to say that the
Appellants, or these officers contrary to what they had said to the court, were aware of the existence of
Yousuf Essa’s caveat, even before they sold the property to the 2nd Appellant. This was so, according to
him, because even before the caveat was lodged there were negotiations between the Respondents on one
hand and the 1st Appellant and Simbeye Enterprises Limited on other hand. Asked as to which transaction
came first, he submitted that he did not know which of the two transactions came first as the negotiations did
not have the actual dates. He went on to say that the agreement between Simbeye Enterprises Limited and
the 1st Appellant was not dated. He therefore went on to submit that, the Appellants’ assertion that the 2nd
Appellant replied to the advertisement and that the K200 000 000 00 was the best price they could get for the
property because there was no evidence of any other offers which the Appellants obtained, should be
queried. In his own view, the mortgagees bulldozed the mortgagor in obtaining the vacant possession of the
property in question.
He argued that the mortgagees should have, under Order 30 Rule 14 of the High Court Rules (4), which is
the same as Order 18 of the Supreme Court Rules (7) applied for vacant possession. He went on to submit
that the mortgagees did not even produce a statement of accounts neither did they give 30 days notice as
per Clause (7) of the Mortgage Deed. He went into details of the correspondence between the Appellants
and the Respondent in which the Appellants demanded the Respondent to redeem the mortgage and the
Appellant gave the Respondent notice that they would proceed to sell the property in question if the
Respondent did not redeem the mortgage within a given period. His submissions are that the purported
notices given to the Respondent were less than 30 days and therefore such notices were defective as
Clause (7) clearly stated that the notice should be not less than 30 days. When it was pointed out to him that
in fact the transaction between the 1st Appellant and Simbeye Enterprises Limited, had already been
concluded and the title deeds were in the name of the 2nd Appellant, he responded that, since in his view the
sale between the 1st Appellant and 2nd Appellant was irregular, as the sale price was unjustifiably and
inequitably low, the sale transaction therefore was null and void and as such the court had power to set it
aside. When it was pointed out to him, that according to the record, the court refused to join Simbeye
Enterprises Limited as a party, he argued that the court below was right to have rejected the application to

61
[1999] ZR 75.

124
join Simbeye Enterprises Limited as 2nd Respondent, as according to him, since there were already gaps in
the process, issued by the Appellants, the court did not have to help them make good their gaps and that it
was rather late to join the other party.
He, further in response, argued that although he conceded that the mortgagor had failed to discharge his
loan obligations, and that he pleaded for more time to discharge this obligation, that did not legitimize the
sale of the property by the Appellants. These were the arguments before us.
We have considered all the arguments and evidence before us. From the submissions of the parties, it can
be clearly seen that the major issues, which arose in the appeal, are:
1) Whether or not the caveator can be made a party to the proceedings before this court under Order 15 of
the Rules of the Supreme Court Rules ; and
2) What is the status of the contract of sale between the 1st Appellant and the 2nd Appellant?
Order 30 Rule 14 of the High Court rules says: -
“ Any Mortgagee or mortgagor , whether legal or equitable, or any person entitled to having property
subject to a legal or equitable charge, or any person having the right to foreclosure or redeem any
mortgage , whether legal or equitable , may take out as of course an originating summons, returnable
in the chambers of a judge for such relief of the nature of the kind following as may be the summons
be specified , and as the circumstances of the case mat require; that is to say –( our own emphasis)
payment of monies secured by mortgage or charge ;
sale;
Foreclosure;
Delivery of possession( whether before or after foreclosure ) to the mortgagee or person entitled to
The charge by the mortgagor or person having the property subject to the charge or by any other
person in, or alleged to be in possession of the property;
Redemption;
Reconveyance;
Delivery of possession by the mortgagee.”

This provision is not mandatory.

We note that there was common ground on almost all the facts before the High Court. There was common
ground that although the respondent (mortgagor) had paid some money towards the liquidation of the loan,
he had failed to redeem the mortgage within the stipulated time. It is also common ground that the
respondent never denied the fact. It is also common ground that through out the correspondence and even in
the pleadings he accepted that fact and the fact that the 1 st appellant had the right to sell the property in
accordance with clause(7) of the mortgage deed as he only pleaded with the 1 st appellant to waive clause (7)
of the mortgage deed which says ;

“Section 20 of the conveyancing Act 1881 shall not apply to this security but the statutory power of
sale shall as between the bank and purchaser from the bank be exercisable at any time after the
execution of this security provided that the Bank shall not exercise the said power of sale until
payment of the moneys hereby secured has been demanded and the Mortgagor shall have made
default for one month in paying the same but this proviso is for the protection of the Mortgagor only
and shall not affect a purchaser who shall not be concerned to see or enquire whether a case has
risen to authorize the sale or due notice has been given or the power of sale is otherwise properly
and regularly exercised. “

Section 19 of the Conveyance Act provides for circumstances when the mortgagee can sell property if the
mortgagor has defaulted in redeeming the mortgage. Section 20 says:

“A mortgagee shall not exercise the power of sale conferred by this Act unless or until (i) notice
requiring payment of the mortgage money has been served on the mortgagor or one of several
mortgagors and default has been made in payment of the mortgage money, or of part thereof, for
three months after such service;
or (ii) some interest under the mortgage is in arrears and unpaid for two months after becoming
due; or (iii) there has been a breach of some provision contained in the mortgage deed or in this

125
 Act; and on the part of the mortgagor, or of some person concurring in making the mortgage, to be
observed or performed, other than and besides a covenant for payment of the mortgage money or
interest thereon.”

As can be seen by clause (7), the 1st Appellant and the Respondent by agreement excluded the application
of Section 20 of the Conveyancing Act in this case. Our understanding is that, by such a provision, the 1st
Appellant and the Respondent agreed that if the Respondent failed to redeem the mortgage within a
stipulated time, that is 30 days, the 1st Appellant had the right to sell without recourse to court. It should also
be noted that the proviso in clause 7 categorically states that the protection provided in this clause, although
it is only for a mortgagor, shall not affect a purchaser who was not concerned to see or enquire whether a
cause has arisen to authorize the sale or whether due notice has been given or whether the power of sale
has been otherwise properly and regularly exercised. In this case, there was no evidence adduced by the
Respondent that the 2nd Appellant was not covered by this proviso. In our view, Order 30 Rule 14 does not
apply to the 1st Appellant. Mr. Yousuf argued rather forcefully that as the sale price was unjustifiably and
inequitably low, the transaction between the 1st and 2nd Appellants was irregular and that this court had power
to set it aside. In the case of Daka v Patel and Zambia State Insurance Corporation Limited,62 this court
inter alia held that sale under Section 19 of the Conveyance Act can be done by auction or private contract.
Section 101 of the 1925 Act gives power of sale to a mortgagee which is binding on the mortgagor. Also at
common law a mortgagee is not directly a trustee of the power of sale. The power for sale given to a
mortgagee is to enable him to realize his debt, if he exercise it bona fide for that purpose without corruption
or collusion with the purchaser, the court will not interfere, even though the sale was disadvantageous to the
mortgagor unless the price is very low for it to be in itself evidence of fraud.

In the case before us, there was no evidence that there was any collusion between the 1 st and 2nd Appellants.
Neither was there any evidence of corruption, nor that K200 000 000 00 was too low a purchase price, as to
be evidence in itself of fraud. (There was evidence that the 1 st Appellant advertised this property in both the
Daily Mail and Times of Zambia). There was evidence that the 1 st Appellant chose K200 000 000 00 as the
highest bid for the property in question. In our view, therefore, the 2 nd Appellant was a bona fide purchaser.
He is therefore covered by the proviso in clause (7) of the Mortgage Deed.

Our conclusion are therefore that Order 30 Rule 14 of the High Court rules does not apply to this case before
us; that a caveator can be made a party to these proceedings even at this stage. In view of our conclusions
the appeal has merits and is allowed…

6.5 SUMMARY OF CHAPTER SIX

This chapter has examined and considered the law of mortgages. Like
many other concepts in land law, a mortgage originates in contract.
Although a mortgage originates in a contract, it also constitutes a
proprietary interest in land. Under a mortgage transaction, the mortgagee
obtains an estate or interest in the land and the borrower retains an ‘equity
of redemption’ which encapsulates his residual rights in the property. The

62
[1995-1997] ZR 108.

126
proprietary nature of a mortgage brings with it the intervention and
attention of equity, and this can result in a conflict between the mortgage
as an interest in land and the mortgage as a creation of a contract.
The equity maxim ‘once a mortgage always a mortgage’ underscores the point
that a mortgage should not be rendered irredeemable. Any provision
inserted in a mortgage deed to prevent redemption on payment or
performance of the debt or obligation for which the security was given is
what is meant by a clog or fetter on the equity of redemption and is
therefore void. The mortgagor’s right to redeem the mortgaged property
or his ‘equity of redemption’ as it is termed is a necessary incident to
every mortgage, and this right cannot be clogged or fettered. The
interference of equity into a purely contractual arrangement has been
seen or noted from some of the cases that have been excerpted under this
chapter, including the S. Brian Musonda case where it was pointed out
that “in the exercise of it’s equitable jurisdiction, the Court has long been entitled
to interfere with the contractual right of the mortgagee to the extent of enlarging
time even when there is foreclosure… or suspending orders for possession or
postponing the alternatives if there are reasonable prospects that the moneys due
can be paid within a reasonable time…”

The mortgagee’s remedies on default by the mortgagor are, foreclosure,

sale, appointment of a receiver and to take possession but on terms of
strict account. These remedies are cumulative. A mortgagee does not
usually need a court order to execute a sale. There is a statutory power of
sale under the Law of Property and Conveyancing Act of 1881 - 1911. A
sale has to be a true sale. A colourable sale may be set aside by court. A
mortgagee must sell as if he was selling his own property. He is under a
legal duty to get the best available price. Where a mortgagee exercises his
right of sale, he must account to the mortgagor the proceeds of sale.

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