Dick Chagwamnjira t/a Chagwamnjira and Co v Kapeta, Liquidator of Finance Bank (Commercial Case No.65 of 2007) [2008] MWCommC 9 (16 January 2008);

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IN THE HIGH COURT OF MALAWI COMMERCIAL DIVISION BLANTYRE REGISTRY COMMERCIAL CASE NO.65 OF 2007 IN THE MATTER OF SECTION 275 OF THE COMPANIES ACT (CAP 46:01) OF THE LAWS OF MALAWI AND IN THE MATTER OF DICK CHAGWAMNJIRA t/a CHAGWAMNJIRA AND CO…………………………………………………………………………………………………………………………APPELLANT -AND- MR. KHUZE KAPETA ESQ. THE LIQUIDATOR OF FINANCE BANK IN VOLUNTARY LIQUIDATION…………………………………....……………………..RESPONDENT CORAM: HON. MR JUSTICE F.E. KAPANDA Chagwamnjira of Counsel, for the Appellant Mwenefumbo of Counsel for the Respondent E.MPhiri , Court Clerk Place and Dates of hearing : Blantyre, 20th November 2007, 21stNovember 2007, and 29th November, 2007 Place and Date of Ruling : Blantyre, 16th January 2008 _____________________________________________________________ RULING _____________________________________________________________ Kapanda, J: INTRODUCTION The issue before this court is an application against the Respondent in respect of decisions made by him as regards certain bills of cost made by the Appellant. In fact, it is the Appellant’s Notice of Motion brought pursuant to the Companies Act. As it were, the Appellant’s appeal is against the determination of Mr. Khuze Kapeta liquidator of Finance Bank Malawi (in voluntary liquidation). GROUNDS OF APPEAL The Appellant filed grounds of appeal against the said determination of the liquidator herein. The basis of appeal is set out as follows:- The Respondent erred in fact in refusing to pay a bill of K511, 340.00 for Delamere Properties Ltd on grounds that M/s Delamere Properties Ltd did not borrow from the bank when in fact we were given instructions to prepare a bond/guarantee which we did. The Respondent erred in determining that all bills before 30th August 2005 were paid by payment of the sum of K16, 552,505.70 as there in fact bills unpaid as per Statement 1 herein in the sum of K1, 917,147.25 less the duplication for M/s Kanjo and JK Global Investments. The Respondent erred in not taking into account the Appellant’s protestation that the payment of K16, 522,505.70 related to specific bills for which he had sued the bank before it went into liquidation and was not paid for all bills. The Respondent erred in refusing to pay the sum of K9, 998,905.04 and the sum of K1, 917,147.25 without giving against each other bill evidence of prior payment. The Respondent erred in holding that there is an over payment of K4, 188,592.27 as per paragraph 3 of page two without giving details or proof thereof. The Respondent erred in his determination that the sum of K13, 113,087.00 was received by the firm notwithstanding the Appellant’s letter dated 19th September, 2007 which clearly demonstrated that there are no such payments received by the firm except as provided in the letter. The Respondents have erred at law to hold out that a liquidator has the power and mandate to reopen consummated contracts with the bank and demand back payments which the bank has authorized like in the case of Hon. Stambuli and others. The Liquidator erred in demanding payments of receivables which the firm has not received. Further, it is prayed that the costs of and incidental to this application be for the Appellant. The Respondent filed documents with this court indicating that he is opposing the application. These documents were an Affidavit In Opposition, a Further Affidavit In Opposition and Skeleton Arguments. FACTUAL BACKGROUND The facts of this case are well put in the documents filed by the parties. They are so many of them but will have to be summarized. As far as this court was able to discern from the said affidavits, a synopsis of the facts obtaining in this matter are as follows:- It is alleged by the Appellant that the Respondent made the following determination which the Appellant is not happy about:- That a payment of a sum of K16,552,505.70 made on 30th June, 2005 which the Appellant acknowledges receipt of extinguishes the Respondent’s indebtedness to the Appellant and yet there is unpaid bills in the sum of K1,917,147.25 less bills duplicated on Kaimira Kanjo K20,160.00 and K9,000.00 of J.K Global Investments. That the Respondent is entitled a refund of K4, 885,592.47 arising from that fact that before the Bank closed some bills were duplicated and that out of the sum of K10, 849.013.21 paid to Chagwamnjira & Co. between 1st July 2005 to 31st December 2005 some bills in the sum of K6, 666,420.74 are a duplication and the Liquidator now wants a refund of K4, 188,592.47. That there was duplication of fees of K6, 660,420.74 without elaborating which fee notes were duplicated and which payments related to those payments necessitating a refund of K4, 188,592.47. That there is sum of K13,113,087.31 to be paid to the Bank as money received by the Plaintiff and not remitted to the Bank and that the following amounts are payable to him. 4.1 Kati Scales K1, 800,000.00 4.2 Computer Solutions Ltd K 400, 000.00 4.3 Fiskani Takeaway K 90,000.00 4.4. Minimax Ltd K1, 300,000.00 4.5 Commercial World K 250,000.00 4.6 Grain and Milling K 3,516,275.17 4.7 ACT and FMB and Hon. Kaphuka K1, 806,812.00 4.8 Hon. Stambuli K1, 600,000.00 4.9 Paul Chakhumbira K 800,000.00 4.10 Homemakers Malawi Ltd K1, 200,000.00 4.11 Kwik Trading K 350,000.00 Finally, that the bill in respect of Delamere Properties Ltd in the sum of K512,340.00 is not payable because Delamere Properties Ltd never borrowed from the Bank and yet instructions for a bond/guarantee that does not require direct borrowing was issued to the Plaintiff and the work was done. The Appellant now asks this court that it reverses the decision of the Respondent and that the bills of cost that he prepared be paid with interest as provided in some initial bills. As a rejoinder, the Respondent has strongly opposed this application. Further, it is the view of the Respondent that the Appellant is not owed any money in bills as all bills of costs were settled by the Bank and the liquidator. However, the Respondent continued to aver that there are a few ongoing cases on which it owes the Appellant but that the total amount of the fee notes does not exceed the amount that the Appellant owes the bank in respect of money had and received by the Appellant which the latter has allegedly failed, refused and unethically neglected to remit to the liquidator. Indeed, the Respondent argues that it is for the reasons given above that he arrived at the decision that the Appellant is not owed any money in unsettled bills rather it is him who owes the bank. Thus, so the argument continued, the appeal for the reversal of the Appellant’s decision should be dismissed with costs. ANALYSIS As mentioned earlier, the Respondent opposes the application herein and for all intents and purposes it has been submitted on his behalf that the appeal should be dismissed. For lack of terseness I will summarize and replicate his arguments. The said arguments were put as follows: The Respondent in exercise of his powers, and upon thorough reconciliation of the bills raised by the Appellant, made the decision that the latter is not owed any money in unsettled bills. It is said that this assessment was partly premised on the realization by the Respondent that certain bills were duplicated and that Finance Bank of Malawi (bank) had previously agreed with the Appellant to settle all outstanding bills as of June 2005 which they did. Further, it is urged on behalf of the Respondent that he realized that the Appellant had received money on trust and on behalf of the bank which money has not been remitted to the bank. Accordingly, the Respondent decided that the bank did not owe the appellant any money in unsettled bills. In its place, the Appellant owed the bank money received on trust which the said Appellant did not remit to the bank. I will now, without much ado, delve into the substantive issue that requires this court’s determination. I wish to express my sincere gratitude to Counsel for their careful and cogent written submissions on the issue that arises for consideration in this matter. Any intelligibility in this ruling 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. Actually, if I had attempted to include all their arguments this ruling would have been unnecessarily long. 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. I now proceed to consider the pertinent issue for consideration in this action. This is now an opportune time to enumerate the issue for determination in this matter. ISSUE FOR DETERMINATION The question that has been isolated herein below arises from my reading of the Notice of Motion, affidavits both in support and opposition of the Motion herein, and the arguments of Counsel. It will suffice to put it here that, as I see it, there is one issue that needs to be determined by me in this matter. The said question is whether the respondent’s decision made on 16th October 2007 is erroneous and ought to be reversed? There are other secondary questions that will also be alluded to later in this ruling. LAW AND DISCUSSION Functions of liquidator1 Essentially the functions of liquidator are to identify the company’s assets, realize them, settle its debts and repay the remainder to its creditors and members. Thus, the major function of a liquidator is to pay off the company’s debts. However, before the debt can be paid, it must first be proved against the company. The duty to prove a debt rests on the creditor who alleges the existence of such debt. Remedies to aggrieved party Any person who is aggrieved by the decision of a liquidator may apply to court to confirm, reverse or modify the act or decision complained of or make such order as it deems fit2. Accordingly, the application by the Appellant is well within the statutory law. Fiduciaries According to my understanding of the law where a general authority is given to an agent, this implies a right to do all subordinate acts incidental to and necessary for the execution of that authority and if notice is not given that the authority is specially limited, the principal is bound3. However, it is trite law that if a person manages a property and is in a fiduciary position he is prohibited from obtaining any personal benefit by availing himself of his position in the absence of authorization from the beneficiary4. More importantly, it is well to point out that the obligation of a solicitor (lawyer) towards his client may be viewed from two aspects: that of equity and that of the common law. In equity the relationship of solicitor (lawyer) and client is recognized as a fiduciary relationship and carries with it obligations on the lawyer’s (solicitor’s) part to act with strict fairness and openness towards his client5. Further, at the common law a lawyer’s (solicitor’s) fee, or what is commonly called a retainer, imposes on him an obligation to be skilful and careful. Indeed, as I understand the law, an attorney has the duty to ensure that the books of his firm are properly kept and that he is obliged to account for moneys received in a trust account created by the fiduciary relationship6 that arises between a lawyer and a client. Furthermore, it has instructively been held, in a case involving breach of trust by a solicitor, that the principles governing the award of damages at common law are equally applicable in equity7. As stated earlier, the Respondent in exercise of his powers as liquidator made the decision that the Appellant is not owed any money in unsettled bills. As I have been able to gather from the material before this court this decision was partly based on the realization by the Respondent that certain bills were duplicated and also upon thorough reconciliation of the bills raised by the appellant. Additionally, it would appear that the decision was made on realizing that Finance Bank of Malawi (in liquidation) had previously agreed with the Appellant to settle all outstanding bills as of June 2005. There is no doubt in my judgment this was done. Further, I find and conclude that from the evidence on record that the Respondent realized that the Appellant had received money from various sources on trust on behalf of the bank which the latter had not remitted to the bank. Accordingly, on noticing that there was money that was received on trust but not remitted and that there was duplication of bills of cost, the Appellant was right in making the decision that he made. For the avoidance of any doubt, this Court finds and concludes that indeed there were reasonable grounds for making the decision being appealed against i.e. that the bank did not owe the Appellant any money in respect of unsettled bills. In fact, the Court finds that there are indeed various documents which have been exhibited to the Respondent’s affidavit, which demonstrate that the Appellant is not owed any money. If anything it is apparent that the Appellant that owes the Respondent money received on behalf of the bank but which the Appellant has in breach of his obligations refused or neglected to remit to the Respondent. CONCLUSION AND DISPOSITION The Appellant has not made out its case. In the circumstances, I refuse to make the orders sought in these proceedings. This finding is premised on the ground that there is cogent evidence to demonstrate that it is highly probable that the Appellant received money which he did not remit to the bank and that there was duplication of certain bills for which the Appellant had thus been paid in excess of the amounts that were due. As a matter of fact, it would appear that it is the Appellant who owes the bank money received on trust. This is of course subject to an account being taken to ascertain how much is owed by the Appellant. Accordingly, it is ordered that an account be taken to ascertain this. Thus, as matters stand, there was a good ground for the Defendant to make the decision it made. Until such an account is done the Defendant’s decision shall stand. Costs The position at law is that costs of and incidental to all proceedings in the High Court shall be in the discretion of the High Court8. Additionally, it is trite law that costs normally follow the event. An instructive authority is Order 62 of the Rules of Supreme Court and also the case of Chihana v Speaker of the National Assembly and Malawi Electoral Commission9. Indeed, this is echoed in the case of the State v OPC et al ex parte Chilumpha, where Justice Chipeta put it this way:- “The general rule guiding Courts on the question of costs is that costs follow the event.” I have upheld the Respondent’s arguments in opposition to the application herein. Accordingly, the Appellant should be condemned in costs. It is so adjudged that the Appellant shall pay the costs of, and occasioned by, this application. And the Appellant is hereby condemned to pay costs of, and occasioned by, these proceedings. Pronounced in Chambers this 16th day of January, 2008 at the Commercial Division of the High Court of Malawi, Blantyre Registry. F.E. Kapanda JUDGE 1 Section 286 of the Companies Act 2 Section 275 of the Companies Act 3 Collen v Gardener (1856) 21 Beav. 540;52 ER 968. 4 D.B Parker & A.R Mellows The Modern Law of Trusts 5th Ed, London, Sweet & Maxwell. 5 Halsbury’s Laws of England 4th Edn para. 131. 6 Incorporated Law Society, Transvaal v K [1959) 2 SA 389 (TPD) 7 Target Holdings Ltd v Redferns (A firm) [1996] AC 421;[1995] 3 ALL ER 786. 8 Section of the 30 Courts Act 9 Misc Civ Cas. No. 2933 of 2005 (H.C) (Unrep.).