Burco Electronic Systems Limited v City Motors Limited (Commercial Case No.13 of 2007) [2008] MWCommC 11 (13 March 2008);

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IN THE HIGH COURT OF MALAWI

 

COMMERCIAL DIVISION

BLANTYRE REGISTRY

 

COMMERCIAL CASE NO.13 OF 2007

 

BETWEEN:

 

BURCO ELECTRONIC SYSTEMS LIMITED………………………………….PLAINTIFF

-AND-

City Motors Limited…………………………………….…..……………………..DEFENDANT

 

 

 

CORAM: HON. MR JUSTICE F.E. KAPANDA

Mwangomba of Counsel for the Plaintiff

Katundu of Counsel for the Defendant

Mrs. G. Kampondeni, Court Reporter

Fatch , Court Clerk

 

Place and Date of hearing : Blantyre, 14th January 2008, 16th January 2008

Place and Date of Judgment : Blantyre, 31st March 2008

 

 

 

 

 

 

 

________________________________________________________

JUDGMENT

________________________________________________________

 

Kapanda, J:

 

INTRODUCTION

 

The Plaintiff has brought this action against the Defendant claiming the following:-

  1. The sum of K1,073,685.04

  2. Compound interest on the said sum of K1,073,685.04 at the rate of 1% above the National Bank of Malawi from the date payment was due until full payment thereof.

Further, it is prayed that the costs of and incidental to this action be for the Plaintiff.

The Defendant denies the Plaintiff’s claim and, inter alia, contends as follows:

(a) On or about the 20th day of June 2000, the Defendant paid to Plaintiff the sum of K500,000.00 for equipment that was never eventually delivered to the Defendant.

(b) At the time the K500,000.00 was paid by the Defendant to the Plaintiff the exchange rate to the United States Dollar was K54.8625 to US$1. The total United States Dollar amount paid was US$9,113.69.

(c) The K500,000.00 (US$9,113.69) was agreed to be treated as advance payment for goods that would be purchased by the Defendant at a later date at the then prevailing exchange rates.

(d) On or about the 14th day of August 2006, the Defendant purchased various equipment from the Plaintiff worth K1,469,345.04.

(e) The payment for the said equipment was to come from the K500,000.00 (US$9,113.69) that the Defendant had already paid the Plaintiff more than 5 years earlier.

(f) On or about the 1st day of March 2007, the Defendant made further purchases of K104,340.00 from the Plaintiff whose payment was also to come from the MK500,000.00 (US$9,113.69).

In essence the Defendant denies owing the Plaintiff any balance as alleged by the said Plaintiff or at all. In addition, the Defendant avers that using the exchange rate at the time the deliveries of the various equipments was made it is clear to it that the deposit made in the year 2000 fully covers and exceeds the costs of the equipment purchased. Further, the Defendant refers to paragraphs 4 and 5 of the Plaintiff’s Statement of Claim and denies owing the alleged sum of K1,023,685.04. Indeed, Defendant says that the loss and damage alleged in the Statement of Claim are denied. The Defendant then prays that the Plaintiff’s action herein be dismissed with costs.

In reply the Plaintiff pleads in the following manner in its Reply to the Defence:-

(a) The Plaintiff admits that on or about 20th June, 2000 the Defendant paid the sum of MK500,000 being deposit for purchase of soft ware.

(b) The order for the soft ware was eventually cancelled by the Defendant as they decided to source it elsewhere.

(c) The said deposit referred to in paragraph 1 was paid in Malawi Kwacha and not in US$ and the Plaintiff denies that there was any agreement to convert the said deposit into US$.

(d) The Plaintiff pleads that after the order referred to in paragraph 1 was cancelled by the Defendant they offered to refund the deposit to the Defendant who later advised it to keep the money as they opted to use the money for purchase of hardware which order took unreasonably long to be placed.

(e) It was the understanding of the parties that the said sum of MK500,000 would be off-set from the purchase price of the hardware and any shortfall was to be paid under normal trading practice.

(f) The Plaintiff… and denies that there was any agreement to convert the said deposit of MK500,000 into US$ at the rate prevailing at the date of payment and reconvert the US$ amount arrived at into Malawi Kwacha at the rate ruling at the date of purchase of the hardware.

(g) In any case it is illegal and contrary to acceptable business practice to sell goods and services in Malawi in foreign currency therefore, there is no way the plaintiff could agree with the Defendant for conversion of MK500,000 into US$ when the agreed sale of software was in Malawi Kwacha.

(h) The Plaintiff joins issue with the defendant on their defence save in so far as the same consists of admissions”.

There is so much I have put in the introduction to this judgment. I will now proceed to deal with the facts of this case.

 

FACTUAL BACKGROUND

The facts of this case are lengthy. They will have to be summarized. The said facts are to be discerned from the evidence on record. As far as this court was able to gather from the said record, an outline of the facts obtaining in this matter are as follows:-

Claimant’s case

Supply of Computer Equipment

It is in evidence that by Local Purchase Order number 0464 the Defendant requested the Plaintiff to supply to it computer equipment. The Claimant duly supplied the equipment on 14th August, 2006 and 1st March, 2007. The total cost of the equipment was MK1,573,685.04.

Prior arrangements

There was a previous dealing between the Claimant and the Defendant. In June, 2000 Defendant had obtained a quotation for the supply of software from the Claimant. Due to instability of the Malawi Kwacha the quotation was in US$. The Defendant paid MK500,000 as deposit for the purchase of the said software.

As it were, though the quotation was in US$ the invoice, which was to be given upon delivery, was to be in Malawi Kwacha.

Cancellation of order

Before the Claimant delivered the software the Defendant cancelled the order. The Plaintiff then offered to refund the sum of MK500,000 paid as deposit. However, the Defendant stopped the Plaintiff from refunding the money. It told the Plaintiff that this money would be used in future for the purchase of hardware.

The Claimant kept the money as they were waiting for the order of the hardware. It is said that the Claimant was sending the Defendant monthly statements reminding it about the MK500,000 standing to the credit of its account.

Use of MK 500,000

The Defendant took about 6 years to place the order for the hardware. The Claimant, upon supplying the hardware, did off set the sum of MK500,000 from the total cost of MK1,573,685.04 being the cost of the hardware. Thus, in the view of the Plaintiff there remained a balance due in the sum of MK1,073,685.04 on the said hardware. However, when the Claimant asked the Defendant to pay the balance the latter refused to pay. The Defendant argued that the deposit of MK500,000 paid in June 2000 fully paid for the cost of the hardware. As a result, a dispute has arisen between the parties on the payment of MK1,073,685.04 hence this action.

 

Defendant’s assertions

The Defendant’s version of what transpired in this matter is absolutely different from what the Plaintiff said in this court. It is contended by the Defendant that on or about the 20th June 2000, it placed an order with the Plaintiff for the purchase of soft ware. The Plaintiff then issued a quotation for the soft ware for US$39,405.00. Further, it is said that simultaneously with the quotation was the Plaintiff’s Conditions Relating to the Sale of IT Products.

The Defendant further asserts that in accordance with said Conditions it made part advance payment towards the US$39,405.00. It says that it paid the dollar equivalent of MK500,000 which was US$9,119.69 as the exchange rate at the time was K54.8625 to US$1. In other words, the Defendant opines that it made an advance payment of the Malawi Kwacha equivalent of US$9,119.69 against the said quote. Thus, leaving a balance of US$30,285.31 as the unsettled amount.

The Defendant does not deny that the June 2000 order was subsequently cancelled. The Defendant continued to assert that the parties agreed that the advance payment that had already been made by it would be treated as advance payment for goods that it would purchase in future. Accordingly, it is said that on 14th August 2006, and 1st March 2007, the Defendant ordered and purchased goods from the Plaintiff on exactly the same conditions that applied in the June 2000 order viz. the quotes were in United States Dollars. But it is said that the payment was to be made in Kwacha at the applicable exchange rate. In its view, so it is said, the advance payment already made by the Defendant for the June 2000 order was to be advance payment for the August 2006 and March 2007 orders. As a result, the advance payment of US$9,113.69 at the applicable exchange rate in 2006 and 2007 is the equivalent of MK1,285,030.75. This sum of MK1,285,030.75, it is further contended, has to be set off from the August 2006 and March 2007 total purchase cost of MK1,573,685.05 leaving a balance of MK288,654.29.

 

ANALYSIS

As mentioned earlier, the Defendant opposes the action herein. For all intents and purposes it has been submitted on its behalf that the action by the Plaintiff be dismissed. Naturally, the Plaintiff is of the view that it has made out its case against the Defendant. For lack of terseness I will summarize and replicate the arguments of the parties. The said arguments were put into categories as follows:-

Isolation of contracts

It is the view of the Plaintiff that the Defendant committed a very serious error of judgment due to failure to realize that there were basically two separate contracts entered into by the parties. Accordingly, in its opinion there is need to isolate the contracts into one for the purchase of software and the other for the acquisition of hardware. As it were, the Plaintiff’s arguments were :-

Procurement of software

The Claimant argues that the contract of the year 2000 in respect of which a deposit of MK500,000 was paid on or about 20th June, 2000 was for purchase of software. This contract, so the argument went, had its own terms which, by the Defendant’s own admission, were cancelled. Put differently, the Plaintiff contends that the Defendant unilaterally rescinded the contract. It is further said that the Plaintiff in fact accepted the Defendant’s unilateral rescission and that is why they offered to refund the MK500,000 deposit.

On the other hand, it is urged on behalf of the Plaintiff, that looking at the evidence there was implied agreement to rescind the contract. Accordingly, it decided not to sue the Defendant for breach of contract but instead elected to accept its decision not to be bound. It is further submitted that since the contract was rescinded by the Plaintiff is completely discharged and can not be revived.

Indeed, in its view the contract for purchase of software came to an end and all the terms of the contract also died a natural death. Thus, Conditions of Sale was of no contractual effect whatsoever in the aftermath of cancellation of contract for purchase of software.

Contract for purchase of hardware

As it were, it is submitted by the Plaintiff that the contract for purchase of hardware is quite independent from the rescinded contract for purchase of software. Thus, so the argument continued, it should be treated as such.

No agreement to convert MK500,000

It is submitted by the Plaintiff that whatever was done within the four walls of the contract for purchase of software was absolutely undone by the termination of the contract by cancellation of the same by the Defendant. As such, the Defendant cannot rely on Conditions of Sale as the basis for converting the MK500,000 deposit into US$ after cancellation of that contract. Further, it is submitted that in any case the Plaintiff does not agree that clause 2 of Conditions of Sale supports what the Defendant did to the MK500,000 as the clause does not talk of a deposit but rather about a proposal (quotation). This, in the opinion of the Plaintiff, confirms that the proposal is in US$ but it does not however state that the invoice would be in Malawi Kwacha at the ruling rate at the time of delivery. Furthermore, it is opined that this clause clearly does not support what the Defendant did to the MK500,000 by converting the MK500,000 into US$ using the rate applicable on or about 20th June, 2000 and also changing the dollar amount arrived at back into Malawi Kwacha using the rate applicable in March, 2007.

In fact, it is submitted that the suggestion in paragraphs 1.3 and 1.5 of the defence that there was an agreement that the deposit of MK500,000 was to be converted into US$ is awkward. The Plaintiff continued to suggest that it is incumbent upon the Defendant to prove this allegation. It is further submitted that on the available evidence adduced the Defendant has failed to establish the existence of that agreement.

The Plaintiff accordingly states that that the so-called contract to convert the deposit into US$ using the rate applicable on the date it was paid and reconverting the dollar amount into Malawi Kwacha using rate applicable on date for payment of hardware is the Defendant’s own imagination. It is moreover understood by the Plaintiff the issue of conversion does not stem from any contract (agreement) as the Defendant wants this court to believe.

MK500,000 is the sum due the Defendant

The Plaintiff is of the opinion that in view of the fact that there was no agreement to convert the MK500,000 the money that is due to the Defendant, is the said sum of MK500,000 paid as deposit. The Plaintiff has called in aid the learned authors of Chitty on Contracts and continued to submit that had the Plaintiff not offered to refund the MK500,000 the Defendant may have probably sued for money had and received1. The money had and received by the Plaintiff being the said sum of MK500,000 that was paid by the Defendant as a deposit.

In the absence of an agreement to the contrary, the Plaintiff maintains that on the basis of authority2, the Defendant is only entitled to the money actually paid. The said sum is MK500,000.

Failure by the Defendant to prove own rates

The Plaintiff further sates that apart from the fact that there was no agreement to convert the MK500,000 in the manner suggested by the Defendant it is well to point out that the Defendant did not bring any evidence to prove that at the time they paid a deposit of MK500,000 the exchange rate was MK54.8625 to US$ as pleaded in the statement of defence. Moreover, the Plaintiff says that Defendant did not bring any evidence to prove that at the time they were supposed to pay for the hardware the exchange rate was MK141.00 to 1US$ as set out in Mr. A. Sabadia’s Witness Statement. The Plaintiff suggests that it anticipated that the Defendant would produce the communication from its bankers or advising them about these rates. The best evidence rule, so it is said, demands that the communication from the Bank to the Defendant should have been produced in court3.

Defendant has failed to prove its defence

It is argued by the Plaintiff that the core of the Defendant’s defence is to be found in paragraph 2 of its statement of defence. The relevant part of the said paragraph reads:-

Using the prevailing exchange rate at the time the deliveries of the various equipment was made, it is clear that the defendant’s deposit made in the year 2000 fully covers and in fact exceeds the costs of the equipment purchased.”

The Plaintiff contends that in terms of the law the Defendant is bound to its pleadings which it has not done by miserably failing to prove that the MK500,000 paid as deposit in 2000 fully covers the cost of the hardware. Further, the Plaintiff submits that in fact the Defendant has failed to prove that this deposit actually exceeds the costs of the equipment purchased.

The Plaintiff has further invited me to note that in paragraph 11 of the Witness Statement of Mr. A. Sabadia the Defendant is totally departing from this defence. It is argued that the Defendant’s witness has made an admission that it owes the Plaintiff MK288,654.29. Thus, it is wondered why the Defendant did not pay this sum if they honestly believed that they owed it to the Plaintiff. It continues to question the Defendant’s wisdom in making this admission now whereas it did not amended its defence in the face of the admission. Accordingly, it is the opinion of the Plaintiff, the Defendant’s refusal to pay on the ground that they do not owe any money to the former was in bad faith.

I now proceed to touch on the counter-arguments by the Defendant. For the sake of clarity I have broken down the said counter-arguments into sub-items. The said arguments by the Defendant are as follows:-

Did the Plaintiff quote its products in United States Dollars in the June 2000, August 2006 and March 2007 Orders?

The Defendant submits that it is common case that in June 2000, the Defendant placed an order with the Plaintiff for soft ware. It is further said that the quote was accompanied by Conditions of Sale (Exhibit P5). Further, the Defendant argues that clause 2 of the said Conditions expressly stated that the proposal is given in United States Dollars and will be provisionally invoiced in Malawi Kwacha at the ruling rate at the time of delivery. Furthermore, the Defendant continued to argue, the final rate of exchange would however be determined by the Bank TT selling rate when the customer pays for the goods supplied and that any variance would be for the customer’s account or benefit.

Moreover, the Defendant contends that in August 2006 and March 2007 it purchased various equipments from the Plaintiff on the same terms set out in the Conditions of Sale. That is to say that the equipment was quoted in United States Dollars and payment was to be made in Malawi Kwacha applying the ruling exchange rate at the time of payment.

The Defendant contends that as it sees it what it is saying is uncontroverted.

Did Plaintiff’s Conditions of Sale allow for advance payment?

The Defendant has invited me to read Clause 9 of the Conditions of Sale which is short and it reads:

Terms of payment: Payment in advance or Cash on Delivery”.

It is the Defendant’s view that the above clause was applicable to all the June 2000, August 2006 and March 2007 orders. Accordingly, in its view the June 2000, August 2006 and March 2007 orders allowed for advance payment.

It continued to argue that at the time the advance payment was made against the June 2000 quote, the exchange rate was K54.8625 to the US$. This fact, it continued to say, was raised in paragraph 1.2 of the Defence and the Plaintiff has not taken issue in either the Plaintiff’s reply to Defence or its testimony before the court.

Thus, the Defendant opines, the said sum of K500,000.00 that was paid by it amounts to US$9,113.69 if the rate of K54,8625 to the Dollar is used. Indeed, the Defendant added by saying that the value of the advance payment against the purchase price of US$39,405.00 is US$9,113.69 thereby reducing the purchase price to US$30,285.31.

Did the Defendant did make advance payment for the June 2000 order?

It is the contention of the Defendant that its evidence to the effect that it made an advance payment of K500,000.00 against the United States Dollar quote is not contested.

How was the advance payment to be treated after cancellation of the 2000 order?

As I see it, one of the issues to be considered in this is case is on what the parties agreed on after cancellation of the June 2000 order. It is the view of the Defendant that the June 2000 advance payment was agreed to be considered as advance payment for goods that it would purchase in future. The Defendant explained that it was the common understanding between the parties that the Plaintiff would keep the advance payment and that the Defendant would make a future order when ready.

The Plaintiff’s position, on the other hand, is that after cancellation of the June 2000 order, it offered a refund but that the Defendant told the Plaintiff that it should keep the money. As it were, the Defendant wanted to use it for purchase of hardware.

Accordingly, the issue that still remains to be answered is under what terms or conditions was the advance payment held by the Plaintiff?

Does the Defendant owe the Plaintiff the sums claimed in the Statement of Claim?

It is submitted by Counsel that the Defendant does not owe the Plaintiff the sums set out in the Plaintiff’s Statement of Claim. Further, the Defendant is of the opinion that the Plaintiff set out its own Conditions of Sale where its goods were quoted in United States Dollars and payment, though made in Malawi Kwacha, had to be against the United States Dollar quote at the applicable exchange rate. The Defendant continued to argue that it made an advance payment on the Plaintiff’s terms in June 2000 but the parties agreed to use the advance payment for a future purchase. It is further said that when the time came the Plaintiff again proceeded to quote in United States Dollars. Additionally, the Defendant says that it is surprised that the Plaintiff wishes to refuse to accept that the advance payment made in June 2000 was against a United States Dollar value. Furthermore, it is argued on behalf of the Defendant that the Plaintiff should not be allowed to get away with such conduct. The Defendant therefore prays that the Plaintiff’s action be dismissed with costs.

I wish to express my sincere gratitude to Counsel for their careful and cogent written submissions on the issues that arise for consideration in this matter. Any clarity in this judgment is really due to the said submissions. It has not, however, been possible to refer to each and every detail of their points of view. That notwithstanding, I have only given a sketch of the essence of the arguments of all the parties. However, the parties are advised that all their points of view will be taken into account before arriving at a decision in this matter.

Without much ado, I now proceed to reflect on the pertinent issues for consideration in this action. This is now an appropriate time for me to enumerate the issues for determination in the matter.

 

ISSUES FOR DETERMINATION

The questions that have been isolated herein below arise from my reading of the pleadings, and the arguments of Counsel. As I see it, the following are the issues that call for determination in this matter:-

  1. Whether the Defendant paid sum of MK500,000 being deposit for purchase of software which sum was subsequently to be used as part payment for purchase of hardware.

  2. Whether the Defendant has fully paid the purchase price of the hardware.

Put differently, said the questions that have been isolated herein as arising from my evaluation of the pleadings, and the points of view of Counsel are as follows:

  1. Whether the Plaintiff quoted its products in United States Dollars in the June 2000, August 2006 and March 2007 orders.

(b) Whether the Plaintiff’s Conditions of Sale allowed for advance payment.

(c) Whether the Defendant did make advance payment for the June 2000 order.

(d) If an advance payment was made in June 2000, the value of this advance payment as against the quoted purchase cost of the equipment.

  1. Whether, after cancellation of the June 2000 order, the parties agreed that advance payment already made by the Defendant for the June 2000 order would be treated as advance payment for future orders.

  2. Whether as at August 2006 and March 2007, the Defendant had already had made a United States Dollar valued advance payment, but paid in Malawi Kwacha.

  3. Whether the Defendant owes the Plaintiff the sums claimed in the Statement of Claim.

There are other secondary questions that will also be alluded to later in this judgment. As mentioned previously, the questions that have been isolated herein arise from the pleadings and the arguments of Counsel. There are other ancillary issues that will also be alluded to later in this judgment. I will now, without much ado, proceed to deal with the matters that arise and fall to be resolved.

 

LAW AND DISCUSSION

As mentioned earlier there are essentially two issues to be determined in this matter. These are firstly, whether the Defendant paid sum of MK500,000 being deposit for purchase of software which sum was subsequently to be used as part payment for purchase of hardware. Secondly, the court has to consider whether the Defendant has fully paid the purchase price of the hardware.

As I see it, the matter before me rests to be determined on the evidence and the pleadings. Indeed, I must note that these two issues really can be determined if one looks at the evidence proffered and the pleadings. I appear to have accepted the Plaintiffs version of what transpired in this transaction both on the evidence and pleadings.

Evidence

The evidence for the Plaintiff was clear and straight forward. It was given by Messrs Isaac Luweya, Elia Bodole and John Kachitsa the Plaintiff’s Assistant Accountant, Financial Controller and Sales Manager respectively.

First to take the witness stand was Mr. Isaac Luweya . It is common cause that he was working for the Plaintiff’s at the time the Defendant placed an order for software in the year 2000. In fact, according to his statement he personally talked to Mr. Sabadia of the Defendant Company on that transaction.

It is on record that he admitted that the Defendant ordered the said software in 2000. There is no dispute that the quotation for the software was US$39,405 and that the Defendant paid MK500,000 as deposit. Further, there is no denying of the fact that before the Plaintiff could deliver the software the Defendant cancelled the order.

Furthermore, there is undeniable evidence that shows that soon after cancellation of the order Mr. Isaac Luweya spoke to Mr. Sabadia and offered to refund the sum MK500,000 that was paid as deposit. It is further commonplace that Mr. Sabadia told Mr. Isaac Luweya not refund the MK500,000 deposit as the Defendant wanted to use the money to purchase hardware from the Plaintiff. Mr. Isaac Luweya also told this court that there was never an agreement between the Plaintiff and the Defendant that the deposit of MK500,000 was to be converted into US$ at the time of the payment using exchange rate applicable at that time and converted back into Malawi on the date the Defendant was supposed to pay for the hardware using exchange rate applicable at the date of payment for the hardware. Actually, he also stated that that is why all the monthly statements that were being sent to the Defendant, after cancellation of the order of software, consistently showed the amount standing to the credit of the Defendant’s account as MK500,000 and not US$ equivalent. Accordingly, he produced exhibit P.4 as an illustration of the said statements he was sending every month. He further put it to the court that the Defendant never raised any objection to the fact that the statements were showing the credit balance as MK500,000. Indeed, if the Defendant had any objection one would have expected it raise same. It is well to remember that it took the Defendant about six years to order for the hardware.

I have no reason to doubt the veracity of this testimony. Indeed, this piece of evidence was actually corroborated by tendered exhibits P1, P2 and P3. These were undisputed invoices for purchase of hardware and statement showing outstanding balance on the account.

Therefore, as far as this court is concerned, the deposit of MK500,000 remained as MK500,000. It could not be converted into US$ because there is no evidence of an agreement to do so. Additionally, it must be specifically noted that the evidence of Mr. Isaac Luweya was not in any way successfully contradicted by the Defendant’s only witness. Actually, the said witness was specifically asked to comment on paragraphs 6.8, 6.9 and 6.10 of the statement of Mr. Isaac Luweya. The Defendant’s witness told the court that it is true that he refused to pay.

In fact, as I understand it; and according the testimony before me; there is no such a thing as making a payment towards a quote. I have always understood a quotation as an indication of the purchase price. It is an invitation to treat. If anything any payment made is supposed to be off set from the invoice and not a quotation. That is the normal trade practice. It is also significant to note that in fact it was the Defendant who cancelled the order for software. Since the order was cancelled there is no evidence to demonstrate that the Plaintiff issued an invoice for the price of the software. Therefore, the money kept for the Defendant could not be said to represent purchase of any material.

The long and short of it is that as far as this court is concerned the deposit of MK500,000 remained as MK500,000. It could not be converted into US$ because there is no evidence of an agreement to do so. I must add that Mr. Bodole was emphatic that there was no agreement to convert the deposit of MK500,000 into US$ using exchange rate applicable at the date the deposit was paid and reconverted into Malawi Kwacha at the date of payment for hardware using the rate applicable at that time. He actually tendered a document which is headed “Conditions Relating to the sale of IT Products” and pointed out to this court clause 2 of the said document which unmistakably said that the invoice was to be issued to the Defendant upon delivery of the software not upon quoting. Indeed, he categorically informed us that it is not correct that the deposit was paid against the US$ quote. He further affirmed that the deposit was paid towards an invoice that was to be raised in Malawi Kwacha in future. Moreover, he stated that in any case the payment for the software was to be in Malawi Kwacha not in US$. This is because according to Clause 2 of the said Conditions Relating to the sale of IT Products the invoice was to be in Malawi Kwacha.

Finally, I wish to observe that Mr. John Kachitsa essentially repeated what Mr. Bodole told this court. It is therefore not necessary that I repeat his testimony. It will suffice to put it here that he emphatically put it that when the Defendant ordered the hardware through its then servant one Mr. Mushanga the understanding between him and the Defendant was that the sum of MK500,000 paid as a deposit for purchase of software in 2000 was to be off set from the total cost of the hardware. Furthermore, it was stated by him that throughout the discussion he had with Mr. Mushanga the Defendant did not say anything to the effect that they had paid US$ to the plaintiff and that those dollars were to be converted into Malawi Kwacha using rate applicable on the date of payment for the hardware in order to pay for the hardware. This testimony was not successfully rebutted. Again, this court found Mr. John Kachitsa to be a truthful witness.

Consequently, this court finds and concludes that the argument by the Defendant that they paid US$ is idle talk. Further, on the evidence the Plaintiff’s version sounds very credible.

As mentioned above, the issues for determination can be determined if one looks at the evidence proffered and the pleadings. It is now necessary that I make my observation on the pleadings.

Pleadings

It is trite law that pleadings define the issues between the parties4. Indeed, it is common knowledge, thus I need not cite an authority for it that pleadings serve to determine which party has the onus of proving which material issue in the case. Further, it is settled law that a party to a case cannot rely on a material that has not been pleaded5.

In the said case of Malawi Railways Ltd v P.T.K Nyasulu cited above the Malawi Supreme Court of Appeal dealt with a matter where the Respondent at trial sought to really on an implied term of an employment contract. The Respondent had not pleaded the implied term in the High Court. The High Court had determined the case in the Respondent’s favour on the basis, inter-alia, of the implied term. On appeal in the Supreme Court, Counsel for the Appellant argued, among other things, that the lower court had erred in deciding the case on the basis of an implied term that had not been pleaded. In its unanimous decision on the point, the Malawi Supreme Court instructively put it thus:-

Counsel for the appellant argued, quite correctly in our opinion, that although the learned trial Judge implied into the agreement between the parties the underlined terms that he did, the respondent had not pleaded or alleged such implied terms in the statement of claim. Counsel also pointed out that Order 18, rule 7 of the Rules of the Supreme Court, 1995 Edn at page 291 makes it a duty on every party to the proceedings to plead all material facts which that party will rely upon at the trial.

Counsel cited quite a multitude of authorities in supporting of his argument. We shall only refer to few of these. The first is Blay v Pollard and Morris (1930) 1KB6 28 where Scrutton LJ said at page 634 that:

Cases must be decided on the issues on the record, and if it desired to raise other issues they must be placed on the record by amendment. In the present case, the issue on which the Judge decided was raised by himself without amending the pleading and in my opinion he was not entitled to take such a course. Counsel for the respondent submitted in argument that in paragraph 4 (4) of the Statement of Claim, the respondent prayed.

For “further or other relief”. We do not believe that this satisfactorily complies with the terms of O.18r 7 paragraph 10 at page 292 which states that:

All the materials facts- It is essential that a pleading, if it is not to be embarrassing, should state those facts which will put those against whom it is directed on the guard, and tell them what is the case which they will have to meet (per Cotton LJ in Phillips v Phillips (1878) 4 Q.B.D 127 p.139].

Material” means necessary for the purpose of formulating a complete cause of action; and if any one material statement is omitted, the statement of claim (or defence is bad (per Scott LJ in Bruce v Odhams Press Ltd [1936] 1 ALL ER 287, p.294.

Each party must plead all the material facts on which he means to rely at the trial otherwise he is not entitled to give any evidence of them at the trial. No averment must be omitted which is essential to success. Those facts must be alleged which must, not may, amount to a cause of action (West Rand Co. v Rex [1905] 2 K.B 399. See Ayers v Hanson [1912]. W.N 193). Where the evidence at the trial establishes facts different from those pleaded e.g by the plaintiff as constituting negligence, which are not just a variation, modification or development of what has been alleged but which constitute a radical departure from the case as pleaded, the action will be dismissed (Waghorn v Geroge Wimpey & Co Ltd) [1969] 1 W.L.R 1764; [1970] 1 ALLER 474). Moreover, if the plaintiff succeeded on findings of fact not pleaded by him the judgment would not be allowed to stand, and the Court of Appeal would either dismiss the action (Pawding v London Brick Co (1971) 4 K.I.R 207) or in a proper case will if necessary order a new trial ( Lloyd v West Midlands Gas Board [1971] 1 W.L.R 749; [1971] 1 ALLER 1240 CA).

Similarly, a defendant may be prevented from relying at the trial on a ground of defence not pleaded by him (Davie v New Merton Board Mills Ltd [1956] 1 ALLER 379; But cf Rumbold v.L.C.C (1909) 25 T.L.R 541, C.A, which was not cited in Davie’s Case; for the subsequent history of Davie’s Case,see [1959] A.C 604, H.L. Counsel for the appellant cited an article from the (1960) Current Legal Problems entitled The Present Importance of Pleadings” written by Sir Jack Jacob. The author stated as follows, at page 174:

As the parties are adversaries, it is left to each of them to formulate his case in his own way, subject to the basic rules of pleadings… for the sake of certainty and finally, each party is bound by his own pleadings and cannot be allowed to raise different or fresh case without due amendment properly made. Each party thus knows the case he has to meet and cannot be taken by surprise at the trial. The court itself is as bound by the pleadings of the parties as they are themselves. It is no part of the duty of the court to enter upon any inquiry into the case before it other than adjudicate upon the specific matters in dispute which the parties themselves have raised by their pleadings. Indeed, the court would be acting contrary to its own character and nature if it were to pronounce any claim or defence not made by the parties. To do so would be to enter upon the realm of speculation. Moreover, in such event; parties themselves, or at any rate one of them might well feel aggrieved for a decision given on a claim or defence not made or raised by or against a party is equivalent to not hearing him at all and thus be a denial of justice…. In the adversarial system of litigation therefore, it is the parties themselves who set the agenda for the trial by their pleadings and neither party can complain if the agenda is strictly adhered to. In such an agenda, there is no room for an item called “Any Other Business” in the sense that points other than those specified may be raised without notice. We concur with Counsel for the appellant in his submission that since the respondent did not, in his statement of claim, plead that a term was to be implied in the agreement that subject to good health, good conduct and the continuance of the appellant’s business; the respondent’s employment could not be terminated until he attained the retirement age of six years, the court erred in law in making such an implication”6.

As you might have observed the court has quoted in extension what the superior court in this country said as regards the law on, and the importance of, pleadings. This has been done because of lack of brevity on the part of this court. Further, I cannot agree more to the observations of the Malawi Supreme Court. In point of fact, I adopt what it said and add that the Defendant has to be restricted to the pleadings filed in this court. This court will not allow that it be allowed to go outside the pleadings and hunt for defence(s) anyhow. What then are the pleadings in this matter? As I have been able to gather, the following is what is on record:-

The statement of claim

The Plaintiff’s statement of claim is clear-cut. In paragraphs 1 and 2 it states that the Defendant ordered the computer equipment particularized therein. Further, paragraph 3 stipulates that the total cost of the hardware was MK1,573,685.04 but after crediting the sum of MK500,000 the balance is MK1,073,685.04.

Consequently, the Plaintiff pleads payment of the said sum of MK1,073,685.04 plus interest at 1% above base lending rate of National Bank of Malawi from the date payment was due until full payment thereof.

 

The Defence

As it were, the Defendat avers in paragraph 1.1 that on or about 20th June, 2000 the Defendant paid the Paintiff sum of MK500,000 for equipment that was never delivered. Further, under paragraph 1.2 it states that at the time the sum of MK500,000 was paid the exchange rate to the US$ was MK54.8625 to US$1. The Defendant then proceeds to allege that the total US$ amount paid was US$9,113.69.

Moreover, in paragraph 1.3 the Defendant pleads that the MK500,000 (US$9,113.69)” was agreed to be treated as advance payment for goods that would be purchased by the defendant at a later date at the then prevailing exchange rates.” [Emphasis is mine]

In paragraphs 1.4 and 1.6 the Defendant admits that the Plaintiff supplied goods to the Defendant on 14th August, 2006 and 1st March, 2007 valued at MK1,469,345.04 and MK104,340.00 respectively. Thus, making a total of MK1,573,685.04.

Then, under paragraphs 1.5 and part of 1.6 it is alleged that payment of the sum of MK1,573,685.04 was “to come from the MK500,000 (US$9,113.69) that the Defendant had already paid the Plaintiff more than 5 years earlier”.

Next, in paragraph 2 the Defendant “denies owing the plaintiff any balance as alleged thereon or at all. Using the prevailing exchange rate at the time the deliveries of the various equipment was made, it is clear that the defendant’s deposit made in year 2000 fully covers and in fact exceeds the costs of the equipment purchased.”[Underlining and emphasis mine]

Furthermore, in paragraph 3 the Defendant denies owing the Plaintiff the sum of MK1,023,685.04 claimed.

Reply to Defence

The filing and service of Defence did not close the pleadings in this matter. The Plaintiff filed a reply to the defence. The said reply was in the following terms:-

In paragraphs 1.2 and 3 of the Reply to Defence the Plaintiff admits that the Defendant paid MK500,000 on or about 20th June, 2000. Nevertheless, it is well to point out that the Defendant denies that there was any agreement to convert the MK500,000 into US$. Indeed, the Plaintiff, in paragraphs 4 and 5, pleads that after the Defendant cancelled the order for software in 2000 it offered to refund the deposit of MK500,000 paid but the Defendant advised the Plaintiff not to refund as they wanted it to go towards the purchase of hard ware. The Plaintiff also aver that it was the understanding of the parties that any shortfall after off-setting the sum paid in June 2000 was to be paid under normal trading practice.

Finally, in paragraph 6 the Plaintiff then denies that there was any agreement to convert the said sum of MK500,000 into US$ at the rate prevailing at the date of the payment and reconvert the US$ amount arrived at into Malawi Kwacha at the rate ruling at the date of purchase of the hardware.

The Burden of Proof

The above were the pleadings exchanged between the parties. Both the Defendant and the Plaintiff made various allegations of fact that required proof. As I appreciate the pleadings, it was the Defendant who made positive assertions of fact. It was then incumbent upon it to prove those positive allegations of fact. In saying this I am alive to the fact that the burden of proof in civil matters was powerfully clarified by Denning LJ in Miller v Minister of Pensions7

Further, it is trite law that he who asserts must prove his assertion. Now, I have observed that the Defendant made various positive assertions of fact but did not offer evidence to substantiate those assertions. It is not for the Plaintiff to disprove the Defendant’s allegations; ei qui affirmat non ei qui negat incumbit probatio (Proof rest on he who affirms not he who denies)8. This rule was approved by the House of Lords9 where Lord Maugham said:

The burden of proof in any particular case depends on the circumstances in which the claim arises. In general the rule which applies is Ei qui affirmat non ei qui negat incumbit probatio. It is an ancient rule founded on considerations of good sense and should not be departed from without strong reasons.”10

Further, the learned authors of Phipson on Evidence have set out the rationale behind the rule thus:-

This rule is adopted principally because it is but just that he who invokes the aid of the law should be the first to prove his case and partly because, in the nature of things, a negative is more difficult to establish than an affirmative. The burden of proof is fixed at the beginning of the trial by the state of the pleadings, and it is settled as a question of law, remaining unchanged throughout the trial exactly here the pleadings place it, and never shifting. If when all the evidence, by whomsoever introduced, is in , the party who has this burden has not discharged it, the decision must be against him.11 (Emphasis mine)

I see no reason why this rule should not be adopted in the matter before me. The Defendant has miserably failed to prove that the MK500,000 paid as deposit in 2000 fully covers the cost of the hardware. Further, the Defendant has failed to prove that this deposit “in fact exceeds the costs of the equipment purchased”. In point of fact, this court also notes that the Defendant did not bring any evidence to prove that at the time they paid a deposit of MK500,000 the exchange rate was MK54.8625 to US$ as pleaded in paragraph 1.2 of the statement of defence. Besides, the Defendant did not bring any evidence to prove that at the time they were supposed to pay for the hardware the exchange rate was MK141.00 to 1US$ as set out in paragraph 11 of Mr. A. Sabadia’s Witness Statement. Surely, the Defendant should have produced the communication from its bankers advising them about these rates. As I understand the law, the best evidence rule demands that the communication from the Bank to the Defendant should have been produced in this court12.

Further, it is well to note that in paragraph 11 of the Witness Statement of Mr. A. Sabadia the Defendant is totally departing from its defence. Indeed, the Defendant’s witness has made an admission that it owes the Plaintiff MK288,654.29. Thus, it is wondered why the Defendant did not pay this sum if they honestly believed that they owed it to the Plaintiff. Furthermore, I wonder why the Defendant should be making this admission now and indeed why it did not amended its defence in the face of this admission. Accordingly, it is found and concluded that the Defendant’s refusal to pay on the ground that they do not owe any money to the former was done in bad faith. Therefore, this court finds that the Defendant made a variety of positive assertions of fact but did not proffer evidence to substantiate those claims. Thus, the decision in this action must be against it.

CONCLUSION AND DISPOSITION

It is important to note that exhibit P5 is headed” Conditions relating to the sale of IT products.” As I see it, these conditions were standard and appear to have applied to all sales of IT products at the time. They were not unique to the order for software placed by the Defendant. For that reason, it was to be expected that when the Defendant ordered the software in 2000 it must have been given these terms to regulate the purchase of the software and nothing but the software. Further, there is evidence to demonstrate that at the time the Defendant ordered the hardware in 2006 the standard terms were also given to it. The said conditions were to regulate the purchase of the hardware which order was made in 2006. In fact, there was the evidence of Mr. John Kachitsa which was to the effect that a copy of the conditions of sale was given to the Defendant when it requested for a quote of hardware in 2006.

Obviously the contract for purchase of software was not the same as contract for purchase of hardware. These were two different contracts. It goes without saying that the contract for purchase of software having been cancelled by the Defendant, so were the terms of the contract. However, the standard terms became applicable at the time the order for hardware was made.

The contract for purchase of hardware was made at the time the order for the same was made by the Defendant in 2006 and not in 2000.
I must say that if the Defendant feels hard done by the fact that the MK500,000 paid in 2000 has lost value over the years they have themselves to blame. It is well to remember that it took the Defendant 6 years to place the order for the hardware. The Plaintiff, in Mr. A. Sabadia’s own admission did not in any way contribute to such delay.

The Plaintiff has made out its case against the Defendant. In the circumstances, I see no reason why this court should deny it the remedies sought in these proceedings. Therefore, this court finds and concludes that:

(i) The Defendant paid MK500,000 deposit for purchase of software in 2000. This was offset from purchase price of the hardware thereby leaving a balance of MK 1,073,685.04

(ii) It is clear from the evidence that the Defendant has not fully paid the purchase price of the hardware. Therefore, the Plaintiff is entitled to maintain an action for the balance of the purchase price.13 Further, it is ordered that the Defendant should pay the said sum of MK1,073,685.04 with interest as pleaded.14

 

Costs

It is trite law that costs of and incidental to all proceedings in the High Court shall be in the discretion of the High Court15.

Additionally, it is commonplace that costs normally follow the event. An instructive authority is Order 62 of the Rules of Supreme Court and also the case of Chihana vs. Speaker of the National Assembly and Malawi Electoral Commission16. The Plaintiff has had to resort to litigation to get what is due to him. There is no denying of the fact that the Plaintiff has succeeded in his claim against the Defendant. He must therefore be awarded costs of this action. I so order.


 

Pronounced in Open Court this 31st day of March, 2008 at the Commercial Division of the High Court of Malawi, Blantyre Registry.


 

F.E. Kapanda

JUDGE

 

1 Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] A.C 32

2 Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] A.C 32

3 Chopi vs. Rep 7 MLR 247.

4 Malawi Railways Ltd v P.T.K Nyasulu MSCA Civil Appeal No. 13 of 1992[unreported]

5 Malawi Railways Ltd v P.T.K Nyasulu MSCA Civil Appeal No. 13 of 1992[unreported]

6 Malawi Railways Ltd v P.T.K Nyasulu MSCA Civil Appeal No. 13 of 1992[unreported] , per Kalaile, JA, at (pp.6-9)

7 [1947] 2 ALLER 372

8 Phipson on Evidence (15th Edition) Para:4-03

9 Constantine Line v Imperial Smelting Corporation [1942] A.C 154

10Constantine Line v Imperial Smelting Corporation [1942] A.C 154 at p.174

11 Pickup Thames Insurance Co. 3 QB.D 594 at p.600

12 Chopi vs. Rep 7 MLR 247.

13 Section 49 (1), Sale of Goods Act, Cap 48:01.

14 Gwembere v Malawi Railways Ltd 9 MLR 369 Zgambo v KFCTA 12 MLR 311 Masunkhlal and Company v Omar [1992 ] 15 MLR 444.

15 See S.30 Courts Act.

16 Misc Civ Cas. No. 2933 of 2005 (H.C) (Unrep.).