Finance Bank of Malawi Limited (In Voluntary Liquidation) v Lorgat and Others (56 of 2007) [2008] MWCommC 6 (17 April 2008);

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IN THE HIGH COURT OF MALAWI

 

COMMERCIAL DIVISION

 

BLANTYRE REGISTRY

 

COMMERCIAL CASE NUMBER 56 OF 2007

 

BETWEEN

 

FINANCE BANK OF MALAWI LIMITED

(IN VOLUNTARY LIQUIDATION)……………………………………………......PLAINTIFF

 

AND

 

ISHMAEL LORGAT…………………………………………………………….1ST DEFENDANT

FM LORGAT…………………………………………………………………….2ND DEFENDANT

MIDWAY FILLING STATION………………………………………………...3RD DEFENDANT

 

 

 

CORAM: HON. JUSTICE DR. M.C. MTAMBO

Chagwamnjira, of Counsel for the Plaintiff

Tembenu, of Counsel for the Defendant

Kamanga, Court Clerk

 

 

 

 

 

RULING

 

 

 

 

 

 

 

 

Dr. Mtambo J.

BACKGROUND

 

This is the Defendants’ application for disposal of a case on a point of law under Order 7 rule 11 of the High Court (Commercial Division) Rules. The genesis of the application is that in Civil Cause Number 932 of 2002, the High Court Principal Registry found that the Defendant in that case (now Plaintiff in this case) was liable to refund a purchase price of K15 million paid with respect to a contract for the sale of property known as Title No. Chichiri 52 which sale fell through and the Plaintiff sold the property to another party. The Plaintiff’s counterclaim in that case for an outstanding sum of K14,066,703.37 due on a loan account allegedly not serviced was dismissed inter alia because the court found that although the Plaintiff called it a counterclaim it was in fact a set off and since there was no evidence that that claim had arisen at the time of the commencement of that action the Plaintiff’s set off was not maintainable at law. This finding was upheld on appeal by the Malawi Supreme Court of Appeal.

 

The grounds of the current application are that:

 

  1. the matters raised by the Plaintiff in this action are res judicata, the same having been adjudicated upon by the High Court, Principal Registry in Civil Cause Number 932 of 2002 and by the Malawi Supreme Court of Appeal in MSCA Civil Appeal Number 25 of 2006 between the Plaintiff on the one hand and the first defendant and third defendant on the other.

 

  1. that the Plaintiff is estopped and precluded from raising the same issues before this court.

 

  1. that the present proceedings constitute an abuse of the process of the court.

 

In response to the application, the Plaintiff argues that:

 

  1. the parties are not the same in this action and the preceding one in the High Court Principal Registry. In this case the parties are Finance Bank and Ishmael Lorgat and another Lorgat and Midway Filling Station a Firm. In the other case the parties were Ishmael Lorgat and Midway Filling Station Limited and Finance Bank.

 

  1. in this case the case is for pre-incorporation debts and in the other case it was a set off as a defence and counterclaim on a specific sum of K15 million which the court said had not been made out satisfactorily as a matter of law.

 

  1. Further in this case the claim is not for K15 million which was a claim in the other case but any sum that may be found owing on the account of the Defendants as a contractual payment following the clear terms of the contract to open an account. The issues are clearly different.

 

 

ISSUES

 

  1. Does the mere fact that a matter is re-litigated raise a complete bar to the subsequent proceedings so instituted.

 

  1. Are the parties in the case in the Principal Registry the same as the parties in the case at hand and if not does it matter.

 

  1. Is the cause of action and/or issue in the counterclaim that the Plaintiff raised in the Principal Registry the same as the cause of action and/or issue in the present action.

 

  1. Did the High Court Principal Registry and the Malawi Supreme Court of Appeal make a decision on the merits regarding the Plaintiff’s counterclaim in the first action.

 

 

THE LAW

 

Order 7 rule 11 of the High Court (Commercial Division) Rules provides that:

 

The Court may, upon application of a party or of its own motion determine any question of law…arising in any cause or matter at any stage of the proceedings where it appears to the court that-

a) such question is suitable for determination without a full trial of the action

 

Res Judicata

 

Res Judicata is a special form of estoppel. The rule is to the effect that parties to a judicial decision should not afterwards be allowed to re-litigate the same question. As between themselves the parties are bound by the decision even though it may be wrong and the only way out by an aggrieved party is to appeal. Apart from being barred from re-litigating the same cause of action, the parties are precluded from re-opening any issue which was an essential part of the decision. This position of the law was enunciated in Crown Estate Commissioners v. Desert County Council [1990] Ch.D.

 

Issue and/or cause of action esptoppel

 

This principle of issue estoppel is to the effect that parties should not re-litigate an issue once it is disposed of by a court of competent jurisdiction. In Senner No.2 1 W.L.R. 490, 499, Lord Brandon opined that:

 

in order to create an issue estoppel, three requirements have to be satisfied. The first requirement is that the judgment in the earlier action relied as creating an estoppel must be a) of a court of competent jurisdiction, b) final and conclusive and c) on merits. The second requirement is that the parties (or privies) in the earlier action relied on as creating estoppel, and those in the later action in which that estoppel is raised as a bar, must be the same. The third requirement is that the issue is the same issue as that decided by the judgment in the earlier action”.

 

Lord Upjohn in Carl Zeiss Stiftung v. Rayner & Keeler Ltd. (No.2)b [1967] A.C. 853,946 discussed the rationale behind the rule in the words:

 

The broader principle of res judicata is founded upon the twin principles so frequently expressed in latin that there should be an end to litigation and justice demands that the same party shall not be harassed twice for the same cause”.

 

The same sentiment is apparent in Mkandawire v Council of the University of Malawi MSCA Civil cause Number 24 of 2007 in which a litigant who had lost an action in the Malawi Supreme Court of Appeal for wrongful dismissal on appeal by the Council for the University of Malawi from the Zomba High Court Registry where he had been successful recommenced an action against the same party on the same facts in the constitutional court claiming violation of a constitutional right of fair labour practices and subsequently in the Industrial Relations Court claiming unfair termination. Delivering the judgment of the court, Kalaile Ag. C.J. dismissing a second appeal to the Malawi Supreme Court of Appeal in the recommenced action observed that:

 

res judicata bars litigation of the same cause of action between the same parties where there is prior judgment”.

 

However, it has been decided in Arnold and Others v National Westminister Bank PLC [1991] H.L 93 that although issue estoppel constitutes a complete bar to re-litigation between the same parties of a decided point, its operation could be prevented in special circumstances where further material became available which was relevant to the correct determination of a point involved in earlier proceedings but could not, by reasonable diligence, have been brought forward in those proceedings.

 

Issue estoppel must be contrasted with cause of action estoppel. A cause of action can be defined as a set of facts on the basis of which a claim is proferred. Therefore, where a set of facts is available but a Plaintiff does not invoke all the set of facts in an action, that party will be estopped from bringing a second action against the same party based on some of the set of facts available in the prior action but not utilized.

 

Abuse of the Process of the Court

 

The courts should not attempt to define or categorize fully what may amount to an abuse of process. However, it is an abuse of the process of the court and contrary to public policy for a party to re-litigate the issue of fraud after the same issue has been tried and decided by the court (House of Spring Gardens Ltd. v Waite [1991] 1 Q.B. 241; [1990] 2 E.R. 990, CA). It is an abuse of the process of law for a suitor to litigate again over an identical question which has already been decided against him even though the matter is not strictly res judicata (Stephenson v Garnett [1898] 1 Q.B. 677, CA and Spring Grove Services Ltd. V Deane (1972) 116 S.J. 844. This rule of law is similar to cause of action estoppel.

 

It is however not an abuse of the process of the court for defendants to re-litigate issues of non-disclosure and misrepresentation involving insurance cover decided against them in an earlier action by different Plaintiffs when they intend to cross examine witnesses whom they had been unable to cross examine in the first action, because in that action they had called those witnesses on subpoena as their own witnesses to produce documents (Bragg v Oceanus Melchior & Co. [1988] 1 W.L.R. 1394; [1989] 1 All. E.R. 129, CA).

 

It is an abuse of the process of the court to raise in subsequent proceedings matters which could have and should have been litigated in earlier proceedings (Yat Tung Investment Co. Ltd. v Dao Heng Bank Ltd. [1975] A.C. This point of law was also recognized by Nyirenda J. in Nthara v ADMARC [1995] 1 MLR, 180 where the judge stated that:

 

The point made here is simply that it should not be competent on the part of a litigant who is aware that he has a good case to torment the other party to the case by bringing against him piecemeal actions. There must be an end to litigation and this is why courts might even go beyond the res judicate estoppel and stop litigants in any subsequent proceedings from raising issues which were open to them in earlier proceedings.”

 

The judge went on to quote Spencer-Wilkinson CJ in Inspector of Taxes v Sacranie (1923-60) ALR (Mal) 615 to the effect that a Plaintiff ought not to be allowed in subsequent proceedings to raise a point which was open to him in earlier proceedings.

 

But the failure by the Plaintiff in the first action to join a third person as a defendant in that action under Order 15, rule of the Rules of the Supreme Court, is not such an abuse of the process and the Plaintiff is therefore entitled to bring a second action against that person as a defendant, even though it is contended that the issue in the second action had been adjudicated in the first action (Gleeson v J. Wippell & Henderson (1843) Hare 100). This doctrine does not apply where there has been mere procedural defect and the court has never gone into the merits, though both parties were present before it (Jelson Estates Ltd. V Harvey [1983] 1 W.L.R. 1401; [1984] 1 All.E.R. 12,CA).

 

 

FINDINGS OF THE COURT

 

With respect to the Plaintiff’s counterclaim in the Principal Registry, the Plaintiff did not deny that a refund of the purchase price of K15 million was re-payable but that the refund had to take into account the fact that the Plaintiff partly financed the purchase of the land. The Plaintiff therefore contended that from whatever refund was due must be deducted the loan amount of K6,000,000 plus interest at the bank lending rate. With respect to this matter, the High Court judge had this to

 

say:

 

I wish to pause here and make some observations. Firstly, the argument of the Defendant ignores the fact that the said K6,000,000 was given to the 2nd Plaintiff as an overdraft facility. Further, it would appear that the Defendant had chosen to overlook a term of the agreement of 9th December to the effect that the overdraft was meant to regularize the overdraft that was being maintained by the 2nd Plaintiff with the Defendant…Moreover, the Defendant bank seems to be giving a blind eye to the piece of evidence before this court to the effect that the overdraft was given to the 2nd Plaintiff who is not one and the same person as the 1st Plaintiff. Accordingly, it is important that the deposit that was paid by the 1st Plaintiff as part of the purchase price must be treated differently from the overdraft facility that was accorded to the 2nd Plaintiff”.

 

It is therefore clear from the foregoing that the judge made a finding of fact that the overdraft facility was given to Midway Service Station (Pvt) Limited the 2nd Plaintiff and as such can not be termed a pre-incorporation contract which is the basis of the Plaintiff’s action in the present proceedings.

 

In the Malawi Supreme Court of Appeal at page 9 of the judgment, the court quotes Mr. Tembenu, learned counsel for the Plaintiffs in the High Court action as follows:

 

Lastly, he stated that, as far as the evidence goes, the appellant did not provide any document to show that Mr. Lorgat owed them money in his personal capacity. The onus was on the appellant and they failed to discharge the same on balance of probabilities.”

 

However, the Malawi Supreme Court of Appeal did not specifically conclude whether they agreed with Mr. Tembenu’s argument or not. But looking at the High Court record, particularly the finding of the trial judge quoted above and the general conclusions of the Malawi Supreme Court of Appeal in favour of the Respondents in that case, I find that Mr. Tembenu’s argument was correct. And the Plaintiff in the present action seeks to reopen the matter relying on the same facts having revised the issue albeit against one new and the other a repackaged Plaintiff.

 

 

CONCLUSION AND DISPOSITION

 

Res judicata

 

The question in the Plaintiff’s counterclaim which was litigated in the High Court Civil Cause Number 932 and MSCA Civil Appeal Number 25 of 2006 in the Principal Registry related to an overdraft facility to the tune of K6,000,000 plus interest allegedly not serviced. The same question is being litigated in this action although the amount is not specific but stated to be whatever is outstanding on the account. The trial judge in the Principal Registry found as a fact that there was no evidence before him that the claimed amount was loaned to Mr. I. I. Lorgat the first Defendant in this case. In fact, the evidence according to the judge showed that the amount was loaned to Mr. I. I. Lorgat’s company Midway Service Station (Pvt) Limited, a different legal entity from Mr. I. I. Lorgat. Therefore, the Plaintiff’s claim in this action as against Mr. I. I. Lorgat based on pre-incorporation contract is caught by the res judicata rule in terms of issue estoppel. Even if the trial judge was wrong to hold that the overdraft was made to the company as opposed to the firm by a similar name, that would be a subject of appeal which right the Plaintiff fully and exhaustively exercised and not a fresh action and as such the Plaintiff’s action is again caught by cause of action estoppel.

 

Abuse of the Process of the court

 

If I am wrong that the Plaintiff’s action is barred by issue and/or cause of action estoppel, I now turn to address the question of abuse of the process of the court. I must emphasize that the categories of abuse of process of the court are never closed. As admitted by learned counsel for the Defendants, Mr. Tembenu, the parties to the action in the Principal Registry are not the same as those in the current action with the exception of Mr. I. I. Lorgat the first Defendant herein. Although the third Defendant in this action is stated to be Midway Filling Station without more, it appears that the third Defendant is sued as a firm. Indeed, I pause to wonder whether the third Defendant can be sued in the form that appears on the pleadings. The third Defendant is the firm which was later incorporated into Midway Service Station (Pvt) Limited, the second Defendant in the action in the Principal Registry. The purport of the Plaintiff’s repackaging of the Plaintiffs in this action is to induce me to make a finding of fact that the loan was a pre-incorporation contract contrary to the finding of the trial judge in the Principal Registry. This to me amounts to an abuse of the process of the court and should not be allowed by any court for if one court decides on the same facts differently from an earlier one simply because of the way the arguments are re-emphasized and the parties repackaged, that throws the administration of justice into disrepute. And for me to hold, as I was at times tempted to do, that the first Defendant can not be made liable on the so called preincorporation contract because he was a party in the first action but the second and third Defendants may be liable simply because they were not made parties in that action smacks of manifest injustice.

 

Disposition

 

In view of my observations and conclusions above, I dismiss the Plaintiff’s action against all the three Defendants on account of res judicata, abuse of process and manifest injustice.

 

The Plaintiff is condemned to costs of this action.

 

Pronounced in Chambers this 17th day of April 2008.

 

 

 

 

Dr. M.C. Mtambo

JUDGE