Africa-Press – Zambia. When Covid hit China in 2019, foreign students were stranded there. An elderly Zambian couple had to evacuate the granddaughter but had no money for flights. In a desperate move, they borrowed ZMW 130,000 from a money lender and pledged their property as collateral. However, they were made to sign ‘contract of sale’ of the property with a clause that they can buy back their property when they have money within six months.
The retired couple paid something but lacked behind in some repayment and interest that had continued to accumulate. The money lender proceeded and changed ownership of the house and later sold it to another company. This prompted the couple to launch a challenge in the Lusaka High Court, contending that they had a loan agreement with the lender and did not sell the property.
On the other hand, the Chinese money lender insisted that it was a sell of the property and not a loan. It produced the ‘contract of sale’ which had USD 9,000 instead of the ZMW130,000 which was disbursed.
The Judge heard witnesses from both sides and concluded that the purported ‘contract of sale’ was in fact a loan agreement and therefore the change of ownership of the property was illegal.
“I am of the considered view the transaction executed between the Plaintiffs and the 1sr Defendant (Money Lender) is a loan and not a sale agreement,” the Judge said.
“This is because the evidence suggests that the Plaintiffs deposited a certificate of title with the 1st Defendant as security for the loan and were given time within which to repay the loan and redeem the property,” the Judge said.
The Court went further to nullify the transaction and reversed the sale of the property by the money lender to a third person saying the transaction was illegal.
“It follows that the transfer of title from the 1st Defendant to the 2nd Defendant (Buyer) was irregular, null and void,” the Judge said and ordered the Ministry of Lands to cancel the title, which was in the name of the new buyer and revert it to the owners.
The Court also wondered how the Ministry of Lands had managed to change ownership from the couple to the Chinese lender when the “Consent to Assign” had expired after 12 months.
The Judge deemed the transaction as a loan and ordered the couple to pay back the remaining balance but using the interest rates under Judgement Act – short term deposit rate – from the date of the loan to the time matter went to Court.
“Thereafter at average lending rate until date of final settlement,” the Judge ordered.
Case citation – Leonard Mwansa and Another v New Future Financial Company Limited – 2023/HPC/0876 and Judgment delivered last month.
Lecture Notes:
This Judgement is in line with the Supreme Court position on how to treat these ‘contract of sale’ agreements. They are to be deemed as loans. However, government has also announced possible legislative changes to deal with this kind of lending and make the Bank of Zambia as supervisor of money lenders.
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