What precipitated the dispute that ultimately birthed this appeal are some allegedly predatory banking practices undertaken by the Respondent bank in respect of the Appellant's accounts held with it. In the first half of 2008, the Appellant approached the respondent with a view to obtaining some finance leases for certain earth moving and other equipment. The Respondent acceded to the Appellant's request and eight individual, identically worded, finance lease agreements were executed by the parties, each such lease agreement specifying the amount financed together with the finance charges payable for the duration of the facility. The aggregate sum involved in those leases amounted to US$1 7 million and was secured by third party mortgages over Stand Nos 4772/M, Chudleigh, Lusaka and 6982/3, Lusaka. Repayment of the sums due under the leases was to be made in monthly instalments over a period of sixty months ending on 30 May, 2013. At the end of the lease period the total repayment was to be US$ 2 280 121. Default in any monthly payment was to attract interest, calculated daily in arrears on the outstanding amount.
The Appellant's version of events was that it commenced repayments and made a total payment of US$ 2 036 146. 35 up to 30 October, 2012 and thereafter an additional lump sum payment of US$ 377 022. 08 on the 4 December, 2012, bringing the total sum repaid to US$ 2 413 168.43. The Appellant claimed that the Respondent, in breach of the terms of the lease agreements, applied and continued to apply various interest charges together with additional charges and expenses which interest and charges were debited to the Appellant's account without preferring to the Appellant a satisfactory, let alone plausible explanation despite being entreated by the Appellant to do so. The Appellant also complained that contrary to the agreed terms on default interest, the Respondent applied interest at the rate of 17 per centum per annum, besides the additional charges which the parties did not agree to or specify in the finance lease agreements. The Appellant particularised the additional charges applied by the Respondent as being: extension charges, late charges, arrears, overdraft cover charges, interest over and above the agreed base rate and an alleged loan facility. The Appellant further claimed that contrary to the Banking and Financial Services (Cost of Borrowing) Regulations 1995ª, the Respondent applied penal and/or default interest totalling US$ 166 133. Furthermore, the Respondent was said to have employed a method not sanctioned by the finance lease agreements, to compute and demand that the Appellant pays an additional US$
419 515. 84 ultimately refusing to release the securities held in respect of the facility until payment of the sum allegedly due was made.
ª Sub regulation (1) (a) of Regulation 10 of the Banking and Financial Services (Cost of Borrowing) Regulations, so far as is relevant provides that "A bank .... shall not impose on a borrower any charge or penalty as a result of the failure by the borrower to repay or pay in accordance with the contract governing the loan other than- interest on an overdue payment on a loan."
The learned judge in the court below found against the Appellant on all its claims except on the issue of VAT and dismissed the action with costs. It is against that judgment that the appeal was launched.
1. A loan is a specified, definite amount advanced to the borrower. It is a matter of special arrangement between a banker and a customer. An overdraft facility, on the other hand, is not a loan in the sum approved which the customer may withdraw at once and which is to be debited against the customer's account. Rather, it is a credit facility enjoyable by the customer on a gradual, as-needs-arise basis to the maximum amount approved by the bank. The limit of the overdraft sum need not be reached by the customer.
2. It is incumbent upon the banker when challenged to explain why it has taken a certain course of action in regard to a customer's account without the customer's concurrence, to justify its action by pointing to a legally sanctioned reason empowering it to do so.
3. The relationship between a banker and a customer is anchored in the authority and the consensual relationship between the parties. That relationship comes into existence by means of a contract to open an account. The terms of that contract, in the majority of cases, are not expressly agreed but are impliedly those usual in the banker-customer relationship. It is not one of the terms of that relationship that the banker will lend to its customer, though there is a tacit understanding that the banker will readily consider a request for a loan from its customer.
4. The common law confers on a bank, when it is owed money, a privilege not available to other creditors - the right of combination or consolidation of accounts. Under this right a bank is entitled to apply a credit balance in favour of the customer on any account against a debit balance on the customer's other accounts with the bank. Garnet v McKewan  LR 8 Ex. 10 cited.
5. The right of combining accounts is exercisable by the bank without giving notice to the customer. Halesowen Presswork Ltd v Westminster Bank  1QB 1 cited.
6. Although a bank has the common law right of combination of accounts, that right is exercisable only where the customer's debited account is in credit and where no other arrangement to deal with the delinquent account, such as charging of default interest, has been invoked. Such combination of accounts does presuppose that the debited account is in credit, and therefore does not technically exist where the customer's account has no credit balance.
7. Where there is no agreement whatsoever for the creation of an overdraft, what the bank could lawfully do is to debit any of the customer's account which is in credit, but not one without a credit balance and thus create an overdraft over which the customer incurs costs in form of overdraft charges and interest. In addition, the overdraft cover charges were wrongfully debited to the Appellant’s account and ought to be reversed. Musonda v Investrust Bank (Plc) Appeal No. 198/09 followed.
8. The charging of default interest, which was sanctioned by the lease agreement was perfectly legitimate and in accordance with sub regulation (1) (a) of Regulation 10 of the Banking and Financial Services (Cost of Borrowing) Regulations made pursuant to the Banking and Financial Services Act, Chapter 387 of the Laws of Zambia. Any other late charges and overdraft charges are unduly punitive and outside the financial lease agreement. They are penal in character and thus not allowed. MCD Civil and Mechanical Engineering Ltd., Davies Mwenya and Cavmont Bank Limited (Selected Judgment No 4 of 2015) and Union Bank Zambia Limited v Southern Province Cooperative Marketing Union Limited (1995 - 1997) ZR 207 affirmed.
9. When there is a new arrangement and the customer has signed the application, then obviously he is bound, but when the bank wishes for its own reasons to impose a new term on the banker customer contract, it must do so in such a way as to leave no possible
doubt, and it cannot do so unilaterally. The bank's duty in this regard is fourfold; (i) to advise the customer of the new term; (ii) to ensure that that advice is received by the customer; (iii) to ensure that the customer understands the consequences of failure to comply with whatever he is asked to do; and (iv) to make it clear that the bank will not be responsible if he fails to comply. The variation of the contract thus requires knowledge and consent on the part of the customer, and possibly also consideration. Burnett v Westminster Bank Ltd  1QB 742 cited.
10. In imposing extension charges and restructuring fees of US$ 85 809. 40 without notification, the Respondent bank acted outside the banker customer relationship and the contractual provisions contained in the lease agreements. The extension charges can therefore not hold.