Chisale v Phiri (Commercial Case No. 29 of 2009) [2011] MWCommC 3 (06 June 2011);

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IN THE HIGH COURT OF MALAWI

COMMERCIAL DIVISION

LILONGWE REGISTRY

COMMERCIAL CASE NO. 29 OF 2009

 

BETWEEN

SYMPATHY KATENGEZA CHISALE                            PLAINTIFF

AND

WILLIE MPHOKA PHIRI                                       DEFENDANT

 

CORAM
Mbendera, SC: Judge

Mrs. Nsanja: for the Plaintiff

Mr. Khonyongwa: for the Defendant

Court Official: Mr. C. Njala

 

JUDGMENT

Mbendera SC, J

These proceedings were commenced in the General Division as civil cause number 1118 of 2007. The writ was issued on 14 December 2007.

The plaintiff is a businessman carrying on the business of buying trucks in the United States of America (USA) and reselling them in Malawi. The defendant is an acquaintance of the plaintiff.  At all material times he was living in the USA. He used to buy trucks in the USA and export them to Malawi for resale.

The Pleadings

The plaintiff’s case is that sometime in July 2007, he travelled to the USA with a view to buy trucks for sale in Malawi. Upon arrival in USA, the plaintiff arranged with the defendant for the defendant to buy the trucks for him as the defendant was familiar with the market. The plaintiff gave the defendant US$30,000 for that purpose.

The plaintiff alleges that the defendant bought three trucks at the cost of US$27,350. He further alleges that the defendant reported that he had bought only two trucks. He hid the third truck. He claims that the third truck is a freightliner with chassis number 2FUY3MCB7TAB73373. These proceedings were brought to recover this truck or a sum of money equivalent to the price at which the plaintiff would have sold the truck in Malawi.

The defendant defended these proceedings vigorously. The defendant denied that the plaintiff was his acquaintance. He further denied that the plaintiff entrusted him with the task of buying trucks for the plaintiff. He contended that the plaintiff approached him to buy from him two trucks at an agreed price of US$30,000. The defendant says he delivered two trucks which the plaintiff refused to accept. He contends that the parties then agreed that the defendant should refund the US$30,000. Thereupon the defendant shipped the two vehicles to a Mr. James Lidamlendo his father – in – law with a view that the vehicles should be sold in Malawi to effect the refund to the plaintiff. The defendant further contended that the plaintiff then instituted proceedings in Malawi in civil cause number 798 of 2007 at the Lilongwe District Registry claiming delivery of the two trucks from Mr. Lidamlendo, the consignee of the defendant. The defendant pleaded that the plaintiff sought an injunction. The Court scheduled the interparties application for 19 September 2007.  The defendant asserts that before 19 September 2007, the plaintiffs’ lawyer approached the defendants’ lawyer and negotiated a settlement out of Court. He contends that a compromise was reached that the plaintiff would have the two trucks which had docked at Durban in South Africa and would have no other claims against the defendant. To effectuate this compromise, an agreement in writing dated 18 September 2007 was drawn and signed by the lawyers as agents of the parties. The defendant contends that he duly performed his part of the bargain by instructing the shipping line to release the trucks to the plaintiff and the plaintiff duly accepted those trucks. The defendant therefore, sets up the agreement of September 18 2007 as a bar to the present proceedings. He contends that these proceedings are an abuse of the court process, the dispute between the parties having been settled. In the premises the defendant denies that he is under any obligation to deliver to the plaintiff a third truck or any truck at all. The defendant counter – claimed. But at the trial the counterclaim was not pursued.

Progression of the Case

The plaintiff did not serve a defence to counterclaim promptly. There followed an ex – parte application for attachment. An order for attachment was duly made on 25 February 2008 conditioned upon the plaintiff filing an interparties application within 7 days. The plaintiff failed to comply with the conditions and the order fell to the ground. The attachment lapsed.  On   3 April 2008 another application was brought before Chombo J for an interlocutory injunction stopping disposal or any dealing with the truck. An order was granted on condition that the plaintiff should file an application for attachment of the truck within 7 days. An application for attachment was filed and made returnable before a judge on 2 May 2008.

In response to the summons for attachment, the defendant filed a notice raising two issues. Firstly, the notice raised a preliminary objection to the propriety of the summons for attachment. It was contended that the application was irregular being made without regard to the lapse certified by a certificate of non - compliance dated 6 March 2008. Secondly, the notice made application for the case to be disposed of on a point of law on consideration of documents only especially the document marked ‘SKC9’ exhibited to the affidavit of the plaintiff. Under this limb of the notice, the defendant sought dismissal of the plaintiff’s claim firstly on grounds that the proceedings were an abuse of the court process and secondly on grounds that the claim disclosed no reasonable cause of action. The defendant brought the application under O.14A r.1 and O.18 r.19 RSC.

In support of the notice, the defendant filed a composite affidavit. The affidavit was in opposition to the summons for attachment order and also in support of the preliminary objection, disposal of case on point law and, dismissal of plaintiff’s case on grounds that it was an abuse of the court process.

Nothing happened thereafter. The notice and the summons for attachment were not prosecuted. Almost a year passed with no activity. The defence was then amended on 12 January 2009. A defence to counterclaim was filed on 2 March 2009.  Thereafter, the proceedings were transferred to this Division by order of the Registrar dated 29 May 2009.

When I was assigned to this Registry I took upon myself to audit all the files which were registered in this court. I set the case down before me for mention with a view to hear from the parties if the matter was still alive. The parties appeared before me on 23 September 2010 and reported that the case was still pending.  They urged me to set it down for mediation because no mediation had previously been attempted. I accordingly did two things. I reassigned the case to myself by directions of that date. I also set the matter down for mediation on 8 October 2010.

When I retired to chambers, I studied the file in earnest.  I noted that there was an outstanding O.14A application pending on the file.  Under O.1 r.3 of the High Court (Commercial Division) Rules 2007, which I will hereafter refer to simply as the Commercial Division Rules, I have the duty to manage cases.  In addition, under Rule 3 of the High Court (Commercial Division) (Mandatory Mediation) Rules, 2007 which for simplicity I will hereafter refer to as Mandatory Mediation Rules, provision is made for exemption of certain cases from mandatory mediation.  Specifically, under Rule 3(b) Mandatory Mediation Rules do not apply to proceedings where there is an application for summary judgment.

O.14 and 14A RSC proceedings which respectively deal with summary judgments and disposal of cases on point of law are grouped together in the Commercial Division Rules under O.7 rr.1 to 11. They fall under summary judgment procedure.  Accordingly, I determined that the case was exempted from mediation in the light of the pending applications under the defendant’s notice.

When the parties appeared before me on 8 October 2010, I sought confirmation from them on the pending applications.  The parties confirmed the position. I ruled that the matter would be exempted from mediation. Instead I gave directions on how the O.7 r.11 application was going to be handled. I directed that the application would be a stand alone application divorced from the attachment application which would fall away. In order to streamline the issues, I directed the defendant to file and serve an O.7 r.11 application de novo. That application was to be complete in itself including supporting affidavits. I also gave directions on the responses and skeleton arguments. The matter was then adjourned to 29 October 2010 for hearing of the summary judgment proceedings.

On 29 October 2010, the defendant was not ready with his case. In addition, the plaintiff objected to the affidavit evidence brought by the defendant. The affidavit was sworn by Mr. Nankhuni of counsel.  It was contended for the plaintiff that the affidavit did not comply with O.14A r.2 practice note 14A/2/8 as read with O.41 r.5 RSC.  The plaintiff’s objection was made out.  Mr. Khonyongwa who appeared for the defendant readily conceded. I accordingly ordered that the defendant should rectify the affidavit evidence. This entailed that the defendant himself would swear an affidavit. In addition, Mr. Nankhuni’s affidavit would be redrawn to touch only on those aspects of the case which deal with Mr. Nankhuni’s involvement in the negotiation of the September 18 Agreement.

In the meantime, it had occurred to me that on the affidavits before me, a case had been made out that the defendant had acted as an agent of the plaintiff in the procurement of the vehicles. It appeared to me that quite apart from the issue raised by the defendant, the case was capable of determination purely on the question of law touching on fiduciaries. This issue was not on the agenda of the parties.  However, the court has power under O.7 r.11 of the Commercial Division Rules, to raise a question not urged by the parties.  O.7 r.11 enables the court to determine a question of law arising in any cause or matter at any stage of the proceedings where it appears to the court that:-

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

(b)   such determination will finally determine (subject only to any possible appeal) the entire cause or matter or any claim or issue therein.

It is significant that under O.7 r.11 (1) of the Commercial Division Rules, the Court may embark upon such a determination on the application of a party or of its own motion. Where the Court raises the question of its own motion and not on the aegis of a party, the Court must be careful to observe the requirements of O.7 r.11 (3). The Rule says that the Court shall not determine any question under this rule unless the parties have either:

(a)   had an opportunity of being heard on the question; or

(b)   consented to an order or judgment on such determination.

Again it should always be remembered that upon such determination the Court may dismiss the cause or matter or make such order or judgment as it thinks just [see O.7 r.11 (2)]. In a summary judgment application, properly so called, the applicant comes to court to assert that the respondent party has no defence and that it is just and equitable that judgment be entered without going to trial. In such a case the Court may enter judgment for the applicant or allow the respondent party to come in and defend.  In an application for disposal of a case on a point of law, the Court must determine the case on that point of law and grant a final judgment. This therefore calls for careful formulation of the question to be determined. Parties have to bear in mind that under O.7 r.11 procedure there is no opportunity for a second bite.  One must get it right the first time. This is a gamble which a party must not take lightly. This is why O.7 r.11 (3) (b) says that the Court should not determine a question unless the parties have at least consented to an order or judgment on such determination. Such a determination will hold even if the parties did not have opportunity of being heard on the question. There are grave consequences to taking O.7 r.11 procedure. In some instances, taking O.7 r.11 route means discarding all other issues, since the entire case will hinge on that solitary question. Careful consideration must therefore be taken and experienced counsels’ opinion sought on the gamble.  Ideally, this procedure should only be adopted in very clear cases. It should never be applied to debatable cases.

Reverting to the question raised by me, I directed the parties to address me on the law pertaining to fiduciaries. Can an agent be allowed to make a secret profit? Does the law allow the agent to benefit from his engagement as an agent without the express consent of his principal? What are the obligations of an agent to his principal? In short, would the defendant here be permitted to keep the third vehicle for himself?

Before raising the questions on the law of fiduciaries, I enquired of counsel on whether my reading of the facts was correct that the parties stood in the position of principal and agent. Mr. Khonyongwa and Mrs. Nsanja who appeared for their respective clients confirmed that my reading was correct. The parties were principal and agent. Having thus introduced this issue on the agenda, I adjourned the proceedings to 18 November 2010 to enable the parties attend to the various aspects of the case that required their attention.

When the parties assembled before me on 18 November 2010 I was addressed by Mr. Khonyongwa for the defendant. He said that they were still not ready with the defendant’s affidavit. The defendant had apparently moved from the USA. He was reported to be either in the United Kingdom or in South Africa.  It was said that the defendant had printed the affidavit prepared by counsel but was failing to have it sworn and certified. Mr. Khonyongwa then reported that it was arranged for the defendant to come to Malawi to attend to the matter in person. He sought adjournment to December 9, 2010. I granted the adjournment to December 9, 2010. I also directed a timetable by which the affidavit and responses, if any should be filed and served.

At the next appearance, the defendant was still not ready with his affidavit. Again for the third time the proceedings were adjourned to allow the defendant to comply with the Court order. The matter was adjourned to 13 January 2011.

When the parties assembled on 13 January 2011, a controversy arose. It arose in a very dramatic manner. In purported compliance with my order of December 2010, the defendant’s lawyers caused four documents to be filed on 7 January 2011. These are an affidavit by Mr. Nankhuni of counsel, an affidavit by Mr. Lidamlendo, an unsworn affidavit in the name of the defendant (Mr. Willie Mphoka Phiri) and supplementary skeleton arguments for the defendant. These affidavits and skeleton arguments were served on 10 January 2011 contrary to the direction that such documents should be served by no later than 4 January 2011. Under the timetable set by the Court the plaintiff had up to 11 January to serve responsive affidavits and skeleton arguments. Because of the delayed service of the four documents, further adjournment became inevitable because the plaintiff was entitled to answer.  The result was that there was a further adjournment to 21 January 2011.

The three affidavits and skeleton arguments filed on 7 January 2011 were all done by Mr. Nankhuni. Mr. Nankhuni is the senior partner in the firm representing the defendant. The documents were not drawn by Mr. Khonyongwa who appeared in the proceedings. It will be recalled that Mr. Khonyongwa had recorded with the court on 29 October 2010 that the relationship between the plaintiff and defendant was one of principal and agent. It was on the basis of these recorded concessions that I introduced the question of law on which the case is to be determined apart from the question touching on the Agreement of September 18, 2007.

The September 18 Agreement itself, in express terms says that the Agreement shall settle all claims “the said SYMPATHY KATENGEZA CHISALE has against the SHIPPER (the defendant) in respect of the US$30,000 that the said SYMPATHY KATENGEZA CHISALE gave to the SHIPPER (the defendant) for the SHIPPER (the defendant) to purchase trucks on behalf of the said SYMPATHY KATENGEZA CHISALE”. One would have thought the issue of the relationship well settled by the September 18 Agreement.

Now in his affidavit, Mr. Lidamlendo states in paragraph 9 that the plaintiff bought the trucks from the defendant. He emphasises that this was the second time the plaintiff had bought trucks from the defendant. The purpose of the affidavit, or at least this paragraph, was to assert that the defendant did not act as an agent of the plaintiff.

Again in paragraph 8 of Mr. Nankhuni’s affidavit, Mr. Nankhuni states that his client’s position as appears at paragraph 8.1.2 was that “the plaintiff paid the defendant US$30,000 to purchase two trucks from the defendant.” Mr. Nankhuni’s affidavit sets out to negate the notion that the defendant was an agent of the plaintiff. The paragraph asserts that the defendant was a seller of the trucks in his own right.

It is perhaps significant to indicate that Mr. Nankhuni’s affidavit changes the position previously asserted in his affidavit of 30 April 2008 sworn when the issue first arose in the General Division.  It also runs counter to the skeleton arguments then filed in the case. In the affidavit of 30 April 2008, Mr. Nankhuni stated at paragraph 8 (ii) that the defendant’s position on this aspect was “that the plaintiff approached the defendant with the sum of US$30,000 for the purchase of two trucks which the defendant duly did but the plaintiff was not satisfied with the trucks that were bought........” (the rest of the paragraph is confused).

It is again, perhaps very telling that the version given by Mr. Nankhuni in his April 30, 2008 affidavit is repeated in the affidavit of 18 October 2010. – See paragraph 7 (ii) of that affidavit.

It is material that in the skeleton arguments filed by Mr. Nankhuni on 30 April 2008 it is stated at paragraph 1.1 that “the plaintiff approached the defendant with the sum of US$30,000 requesting him (the defendant) to buy two trucks which the defendant had shown him....”

Now in the supplementary skeleton arguments filed on 7 January 2011 an attempt was made to negate the order I had made on 29 October 2010. Mr. Nankhuni argues at paragraph 3.1 that “the defendant agrees with the plaintiff’s arguments regarding the duties of fiduciaries”.

Then in paragraph 3.2 Mr. Nankhuni argues that “the defendant denies that he was under such a duty (meaning fiduciary duty) to the plaintiff and further states that the question whether he was a fiduciary can only be decided upon the full trial of the matter”.

The postulation that the nature of the relationship between the parties was open for investigation was also argued in paragraph 2.1 of the supplementary skeleton arguments. There, it was asserted that there was a dispute as to what the relationship was and therefore the question was not proper for determination under O.14A RSC procedure. It was argued that the jurisdiction under O.14 RSC is only exercisable where the issue is one of law or where the facts are not in dispute.

I was most vexed with this sordid attempt to subvert and corrupt the proceedings. I certainly did not expect such subversion after the latitude extended to the defendant that had caused so many adjournments to accommodate him resulting in incessant delays.

I decided to deal with this misconduct promptly. When the parties appeared before me on 13 January 2011, I sought clarification from the defendant. I pointed out that the affidavits and the supplementary skeleton arguments were throwing the propriety of the proceedings into question. Mr. Nankhuni who had drawn these documents was not in attendance. I summoned his presence only to be informed that he had been taken ill.

I then asked Mr. Khonyongwa to record with me whether it was their intention to reopen the issues settled by order of 29 October 2010. Mr. Khonyongwa opened his response by telling me that he had been party to the order of 29 October 2010. He confirmed that on the facts the plaintiff and the defendant were properly in the position of principal and agent. He confirmed that there was an undisputable fiduciary relationship between the parties to this case. He further confirmed and placed on record that the defendant was under a fiduciary duty to the plaintiff. The upshot of it was that Mr. Khonyongwa unreservedly withdrew those portions of the skeleton arguments and the affidavits that questioned the propriety of the proceedings. He invited me to ignore the arguments raised in the supplementary skeleton arguments on this aspect.  The offending portions in the Nankhuni and Lidamlendo affidavits and the offending portions in the skeleton arguments were in the event expunged from the record. He requested me to determine the case on the basis of the established fiduciary relationship of the parties as well as the validity and enforceability of the September 18 Agreement.

A further issue that arose was the unfortunate placement on file of an unsworn affidavit. Mr. Khonyongwa rightly drew my attention to the fact that the defendant had not sworn the affidavit and that in the circumstances the affidavit could not be used in the proceedings. The affidavit was accordingly regarded as taken off the file and does not form part of the record. But for what it is worth, I put it aside with the same observation that it attempted to perpetuate the mischief of brooking controversy where none previously existed.

Let me deal with the issues of ethics that have risen in this matter. I raise them here as a general guide to lawyers.  Legal practitioners are officers of the court. The duty of counsel as an officer of the court is to raise matters that are supported. Counsel should never place issues before the court which he knows to be false. Again counsel should never perpetuate disputes that are nonexistent merely to stall proceedings or cause embarrassment to the proper adjudication of the matter.  In this matter, Mr. Khonyongwa has conducted himself most admirably. He did not draw the offending documents. His conduct in withdrawing the offending portions of the affidavits and skeleton arguments must be commended. I wish to put it on record, and commend his professional conduct to others.

For the general guidance to counsel, I need to say that when counsel has conduct of a particular matter, it is his duty to see to it that the case is conducted ethically, professionally and fairly. He should not allow improper material to be placed before the court by another lawyer in his firm. It is no excuse that another lawyer did authore the document. Counsel with conduct of a matter bears full responsibility. It is therefore his ever present duty to prevent improprieties occurring.

Now I must sum up the sources of evidence in this trial.  On the one side, I have the affidavits of Mr. Nankhuni and Mr. Lidamlendo as the evidence for the defendant.  The defendant himself did not swear any affidavit.  On the other side, I have the affidavits of the plaintiff and Mr. Mvalo. The case then must be decided based on the evidence in these four affidavits only.

The Issues for Determination

We must get back to the issues or questions to be decided.  The defendant’s summons raises the following questions:

(i)   The matter herein be disposed summarily on a point of law;

a)    On consideration of the Settlement Agreement made between the Plaintiff and the Defendant on the 18th  of December 2007 and that the Plaintiff’s claim be therefore dismissed as a matter which was already settled between the parties.

b)    That the question whether by refusing the trucks which the Defendant brought to the Plaintiff and agreeing that the US$30,000 should be refunded to him the Plaintiff cancelled and /or repudiated whatever arrangement that was there between the Plaintiff and the Defendant and that what remained was for the Defendant to refund the US$30,000 to the Plaintiff.    

(ii)  The plaintiff’s action be dismissed as being frivolous, vexatious, scandalous as well as an abuse of the court process.

To these two issues raised by the summons, the court added a third pursuant to O.7 r.11 Commercial Division Rules. The issue was that given that the relationship between the plaintiff and the defendant was that of principal and agent to what extent does the law on fiduciaries affect the case?

Evaluation of the Case

I have been addressed at length. I have also read the briefs filed for the parties. I am indebted to counsel for their industry in researching the law. They made my job easy to come to a determination.  I have read and considered each case cited. I have borne all those cases in mind in coming to my decision.

The Law on Fiduciaries

I have decided that I should tackle the question of fiduciaries first. The case on this aspect turns on the undisputed evidence of the plaintiff. The defendant did not swear any affidavit. The simple material facts are as follows:

i.     The plaintiff gave US$30,000 to the defendant for the purpose that the defendant should buy him trucks. - See paragraphs 5, 25 and 26 of the plaintiff’s affidavit.

ii.    The defendant bought three trucks at a cost of US$27,350. - See paragraph 26 of the plaintiff’s affidavit.  That this is so is supported by documents marked SKC3, SKC4, SKC5 and SKC6 forming part of “Exhibit SKC10” to the plaintiff’s affidavit.

iii.   The defendant hid the third truck from the plaintiff.  He only declared the two trucks. Those trucks are not the subject matter of these proceedings.

       The defendant failed to produce receipts for the trucks he had bought for the plaintiff. – See paragraphs 6, 7, 13 and 27 of the plaintiff’s affidavit.

iv.   The defendant pocketed US$2,650. He did not account to the plaintiff for this balance from the US$30,000 which he had received from the plaintiff. 

I now proceed to discuss the law. A fiduciary is someone who undertakes to act for and on behalf of another in a particular matter in given circumstances which give rise to a relationship of trust and confidence. Millet L.J in Bristol and West Building Society v Mothew [1998] 1 Ch 1 at page 18 explained that;

‘a fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single minded loyalty of his fiduciary.....’

The relationship of Principal and agent is an example of such a fiduciary relationship. Clerk & Lindsell on torts, 18th Edition discusses the operation of the law pertaining to obligations of fiduciaries in chapter 28. Breach of fiduciary duty is a civil cause of action for a failure to meet obligations that in equity are regarded as having been created by the special relationship of fiduciary and principal between the defendant and the claimant. Once the breach is established, a claimant is entitled to equitable compensation for his loss or to restitution for the fiduciary’s unauthorised gain. (See paragraph 28 – 01)

The basis of an action for breach of fiduciary duty is said to be the fiduciary’s exclusive loyalty to his principals interest which he must put above all others including his own. The rationale appears to be that such allegiance on the part of the fiduciary counterbalances the principal’s inherent vulnerability to abuse in such relationship. It is important to understand that the fiduciary’s obligations are imposed by operation of law. The legal obligations arise as a result of the existence of the relationship rather than by any express or implied undertaking or agreement. The nature of the relationship imports the fidelity which the law seeks to enforce. (See paragraph 28 – 07 & 28 – 09).

In English law there are two general duties of a fiduciary. These duties are:-

i.     The fiduciary should not use his position to his own advantage.

ii.    The fiduciary should not in any matter within the scope of his engagement have a personal interest unless this is freely and informedly consented to by his principal or is authorised by law.

The law of Agency has placed upon the agent stringent duties in the performance of his duties. He has to carry out any express instructions given to him by his principal.  (See Chitty on Contracts, Specific Contracts, 26th Edition). The agent as a fiduciary owes special duties to his principal to be honest in carrying out the said instructions. He is forbidden from making a profit for himself in the course of carrying out his principal’s instructions unless he fully informs his principal and obtains his consent.

Equity’s concern to eliminate the possibility of personal profiteering by fiduciaries has resulted in a plethora of strict restrictions on self interested behaviour on the part of fiduciaries.  The relevant proscriptions are broad and yet the liability strict. English law jealously guards the principal’s interest so much so that whenever a fiduciary profits from his engagement, equity will hurry along to take the profit away and give it to the principal.  The law is so strict that it is irrelevant and the fiduciary will not be allowed to argue that the profit was not made at the expense of his principal.  There are many decided cases on this. It suffices to base this judgment only on four cases which illustrate the operation of this law.

The first one is Keech –vs – Standford (1726) sel. Cas. Ch 61. In that case the fiduciary was a trustee who had sought the renewal of a lease he held on trust for his beneficiary. The Lessor refused. Subsequently the trustee sought and obtained the renewal of a lease for his own benefit. As such, there could be no question that the fiduciary was gaining an advantage that was then available to his principal, nor was there any suggestion of fraud on the fiduciary’s part. Nonetheless, the court decided that the fiduciary held the lease as constructive trustee for his principal on the same terms as under the express trust.

Another case is Boardman –vs- Phipps (1967) A.C. 46. In that case the fiduciary was a solicitor to a Trust which had a minority shareholding in a private company. The company had been underperforming and the trustees wished to increase the Trusts’ holding. They were reluctant, however, to seek the courts authorisation for a share purchase on that basis and so some of the trustees authorised the fiduciary to acquire a majority shareholding in his own name. The company’s fortunes improved. This in turn, resulted in a large profit for the Trust, in respect of its shareholding. Equally this resulted in a large profit for the fiduciary in respect of his shareholding. The House of Lords, by a majority, held that the fiduciary was obliged to account to the Trust in respect of his profit.

The Boardman case illustrates that it is of no moment that the activities of the fiduciary actually profit his principal. The House of Lords ordered the surrender of the profits to the Trust notwithstanding that there was no fraud committed by the fiduciary.  The presumption for this disgorgement in such cases arises from equity’s tendency to equate personal gain with disloyalty. However, equity is not without understanding. The presumption can be rebutted if there is strong evidence that the fiduciary’s gain has been made with the full knowledge and assent of the principal.

It is not relevant to show that the principal has suffered no injury. The matter was neatly summed up by Lord Herschell in Bray v Ford [1896] A.C 44 where his Lordship explained that:

“it is an inflexible rule of the court of equity that a person in a fiduciary position is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his duty and interest conflict...... human nature being what it is, there is a danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than by duty, and thus prejudicing those whom he is bound to protect.....’

Hence where a fiduciary makes a profit as a result of his position, the law requires that the said profits should be paid over to the principal (see Attorney General v Blake [1998] 1 ALL E R 833)

In the present case, the facts clearly show fraudulent machinations on the part of the defendant. He bought three trucks but pretended that he had only bought two. He spent US$27,350 and pretended that the entire US$30,000 was spent on the two trucks that he declared. He pocketed US$2,650 and did not declare or account for this balance to the plaintiff. He hid the third vehicle, the subject matter of these proceedings and pretended that he had spent his own money on that truck.

Therefore, on the question of fiduciary duty I find that the defendant misconducted himself as a fiduciary. He acted without loyalty and callously set out to and did defraud the plaintiff with a great deal of impunity. He was not entitled to keep the third truck for himself or the profits from the sale of that truck. The freightliner chassis number 2FUY3MCB7TAB73373 belonged to the plaintiff and the proceeds of sale should have been surrendered to the plaintiff.

This Court sits as a court of law and equity. I must do justice between the parties. The defendant intended and has prosecuted this case with a view to benefit from his own wrong.  The law does not permit him to do that. This court will not allow him to do that.

The September 18 Agreement

I now turn to the questions raised by the defendant.  Given the state of the law pertaining to fiduciaries, I am not surprised that the defendant did not seek to fight the case on that front. The defendant readily conceded the case postulated by the plaintiff concerning fiduciaries.

The defendant came to court to fight the case on a technicality. The technicality touches on what happened to secure the release of the two trucks which are not the subject matter of these proceedings. Whilst the trucks are not in contention in this court, the agreement that secured their release has become relevant in these proceedings. It is important to put the facts and circumstances that gave rise to the September 18 Agreement and the release of those trucks in context.

We must hear and evaluate what was discussed between the plaintiff and the defendant in the USA. The evidence on that is contained in the affidavit of the plaintiff. The defendant offered no evidence. He did not swear any affidavit. The affidavit evidence of the plaintiff shows the following:-

i.     The plaintiff gave US$30,000 to the defendant for the purpose that the defendant should buy him trucks. - See paragraphs 5, 25 and 26 of the plaintiff’s affidavit.

ii.    The defendant bought three trucks at a cost of US$27,350. - see paragraph 26 of the plaintiff’s affidavit.  That this is so is supported by documents marked SKC3, SKC4, SKC5 and SKC6 forming part of “Exhibit SKC10” to the plaintiff’s affidavit.

iii.   The defendant hid the third truck from the plaintiff.

       The defendant failed to produce receipts for the trucks he had bought for the plaintiff. see paragraphs 6, 7, 13 and 27 of the plaintiff’s affidavit.

iv.   Prior to the defendant going to buy the trucks he had shown the plaintiff seven trucks on his computer and asked the plaintiff to choose the ones he liked. The plaintiff chose three out of the seven and the defendant stated to the plaintiff that he was going to buy the three trucks which the plaintiff had chosen. It was after this ‘window shopping’ that the plaintiff gave the defendant US$30,000 to buy the trucks. - See paragraph 7 & 8 of Exhibit SKC10 to the plaintiff’s affidavit.

v.    When the defendant came back from buying the trucks he showed the plaintiff pictures of two trucks which he said he had bought. None of those was any of the trucks the plaintiff had chosen. The plaintiff did not like them. - See paragraph 9 of Exhibit SKC10.

vi.   The defendant offered to refund the US$30,000 to the plaintiff. - See paragraph 10 of Exhibit SKC10.

vii.  Later the plaintiff advised the defendant that he would take one of the trucks and that the defendant should only refund the money for the other truck - See paragraph 11 of Exhibit SKC10.

viii. The plaintiff’s expectations were that the refund would happen before he left the USA to come back to Malawi.  This did not happen. - See paragraph 12 & 15 of Exhibit SKC10.

ix.   The plaintiff went to bid farewell to the defendant and to agree on the way forward. They met at the defendant’s house. The plaintiff told the defendant that since he had failed to refund the money he should just send the trucks to the plaintiff in Malawi. The defendant agreed to do so. - See paragraph 15 of Exhibit SKC10.

X.    The plaintiff flew back to Malawi. He made efforts to contact the defendant but the defendant was not picking the phones and did not respond to emails.

Xi.   The defendant later emailed the plaintiff saying that he had decided to send the two trucks to Malawi, sell the trucks and then effect a refund to the plaintiff.

Xii.  The plaintiff later learnt from the defendant’s brother - in – law that the defendant had in fact sent the trucks to his father - in – law Mr. James Lidamlendo. - See paragraphs 16, 17 & 18 of Exhibit SKC10.

Xiii. The plaintiff instructed his nephew a Mr. Griffin Sosola of South Bend, Indian, USA to go to the defendant’s house to find out if the trucks were still there. Mr. Griffin Sosola involved the police and the defendant revealed that he had sent the trucks to Mr. Lidamlendo in Malawi. Mr. Sosola obtained shipping documents from the defendant which confirmed that the trucks were not sent to the plaintiff but to Mr. Lidamlendo. - See paragraphs 20, 21 & 22 of Exhibit SKC10.

Xiv. Mr. Sosola visited the place where the trucks were bought and obtained copy documents for the purchase of the trucks. That is when Mr. Sosola discovered that three trucks and not two trucks had been bought for the price of US$27,350. He obtained all copy relevant documents and sent them to the plaintiff. That is how SKC3, SKC4, SKC5, SKC6 and SKC7 came into the hands of the plaintiff. Not from the defendant but from his nephew Mr. Griffin Sosola. -  See paragraphs 23, 24 and 25 of Exhibit SKC10.

Xv.  The defendant admits receiving the money. - See paragraph 27 & document marked SKC8 of Exhibit SKC10.

The above stated facts have not been controverted in any way by the defendant. It follows therefore that the trucks that were released in 2007 and the third truck that remained with the defendant were purchased using the plaintiff’s money. The property in those trucks belonged to the plaintiff irrespective of the names under which they were bought. It does not matter that they were all bought in the defendant’s name.

Now the tussle between the defendant and the plaintiff can be readily summarised in a moment. The plaintiff needed his trucks shipped to Malawi. The defendant had meanwhile contrived a plan. The trucks would be shipped to Mr. Lidamlendo, sold and then out of the proceeds refund of US$30,000 in Malawi Kwacha equivalent be given to the plaintiff.  In effect the defendant intended to make a monkey out of the plaintiff. If the plaintiff was to get his trucks he needed the cooperation of the defendant. Without the defendant’s cooperation, the plaintiff would lose his investment. There was no guarantee of any sort that he would ever be given his money whether in US Dollars or in Malawi Kwacha. On the other hand the defendant had nothing to lose. He never had US$30,000 to invest in anything in the first place.

The plaintiff decided to go to Durban to collect the trucks. The defendant knew that the plaintiff would not be able to collect the trucks without his say so. The defendant must have known how desperate the plaintiff was. In the meantime, demurrage charges over the trucks were accumulating on a daily basis at the port. If the trucks were not released in time, the demurrage charges would climb so high that it would cease to be economical to release them. The shipping line or the port authorities would almost certainly auction the trucks to recover their charges. If that happened, what would the defendant lose? Nothing. On the other hand, the plaintiff stood to lose everything he had invested in the trucks.  The plaintiff would be ruined.

The plaintiff went and saw a Mr. Leon Dunn, a lawyer, who advised him that it was of utmost importance that he should secure the release of the trucks lest the trucks got sold to defray expenses. Mr. Leon Dunn got in touch with the defendant by email. The defendant made it clear that he was not going to release the two trucks in Durban unless such a release would constitute a settlement of the case. In other words, he was seeking to release two trucks in order to discharge an obligation to hand over three trucks. The plaintiff was in a catch 22 situation. He was damned if he insisted on his rights and he was damned if he cooperated with the defendant. He reasoned that he was better off if he cooperated with the defendant because then he would at least recover two trucks out of the three. Was this voluntarily? Did he voluntarily choose to have two trucks out of three? The answer is no. I find that no reasonable man would voluntarily act contrary to his own interest. I have sufficient evidence that indicates that he was forced to cooperate with the defendant against his own will and needs. Documents marked SKC11 to exhibit SKC10 paint a good summary of the situation the plaintiff found himself in. The evidence of the plaintiff and Mr. Mvalo indicates that these circumstances compelled the plaintiff to sign the September 18 Agreement as this was the only way the plaintiff could secure the release of the two trucks that had docked in Durban.

The September 18 Agreement was in these terms:

THIS AGREEMENT is made this 18th day of September Two thousand and seven between WILLIE MPHOKA PHIRI of 1661 Lake Dr. Apt 129, Haslet, MI 48840 in the United States of America (hereinafter called “the Shipper”) of the one part, and SYMPATHY KATENGEZA CHISALE of P.O. Box 619, Lilongwe in the Republic of Malawi (hereinafter called “the beneficiary”) of the other part

WHEREAS the Shipper shipped from America two trucks described in the Scheduled hereto to JAMES LIDAMLENDO.

NOW THEREFORE this Agreement witness that

a)     The Shipper has agreed that the name and address

of the Consignee on the shipping documents for the trucks be changed from JAMES LIDAMLENDO, of P.O. Box 2101, Lilongwe, Malawi to SYMPATHY KATENGEZA CHISALE of P.O. Box 619, Lilongwe, Malawi and that the Shipper shall advise the Shipping Line of this by email forthwith

b)     Pursuant to (a) above, the Shipper has further agreed to forthwith advise the Shipping Line by email to let the beneficiary pay freight and related charges

c)      The Shipper shall forthwith advise the clearing agent by email of this arrangement agreed between the parties.

The Schedule hereinbefore referred to (the trucks)

1.     Freightliner truck with engine No. N14 – 435E, and Vin (Chassis) No. 1 FUYDDYB3XLA19246

2.     Freightliner truck with engine No. DET 6 CYL DSL, and Vin (Chassis) No. 1 FUYSSEBXXP963355

IT IS FURTHER AGREED THAT this agreement shall settle all claims whatsoever that the said SYMPATHY KATENGEZA CHISALE has against the SHIPPER in respect of the US$30,000 that the said SYMPATHY KATENGEZA CHISALE gave to the SHIPPER for the SHIPPER to purchase trucks on behalf of the said SYMPATHY KATENGEZA CHISALE.

IN WITNESS WHEREOF the shipper the said WILLIE MPHOKA PHIRI and the beneficiary the said SYMPATHY KATENGEZA CHISALE have through their duly appointed and authorized respective Attorneys duly set their hands hereunto on the day and year first above written.

 

SIGNED on behalf of the Shipper by GIFT NANKHUNI,

the duly appointed and authorized Attorney of the

Shipper the said WILLIE MPHOKA PHIRI      

 

In the presence of

Witness                      JULIUS NYAMBO

Address                     C/O P/BAG B422

                                LILONGWE 3

 

                                ......................

OCCUPATION              LAWYER

SIGNED on behalf of the beneficiary by TITUS MVALO,

the duly appointed and authorized Attorney of the

        beneficiary the said SYMPATHY KATENGEZA CHISALE

     

        In the presence of

        Witness                      ISAAC SONGEA

        Address                     MVALO & COMPANY

                                        P.O. Box 30107

                                        LILONGWE

        OCCUPATION              LEGAL PRACTITIONER

There are a few observations to be made about this agreement. The agreement is not under seal. In addition, the agreement does not recite any consideration for the release of the defendant under the agreement. The basic tenet in contract is that all written agreements not under seal must expressly set out the consideration for the agreement to be valid, binding and enforceable. That is trite law.

The defendant has argued that the September 18 Agreement has the same effect as a consent judgment. He argues that such an agreement can only be set aside by a separate action specifically for that purpose. He relies on Shiptrade International Co. Ltd v Transglobe Produce Exports Ltd (HC) 1997 1 MLR 98.  I have read that case and find that counsel has misunderstand or misapplied the decision in that case. The cited case did not deal with an out of court settlement agreement. It dealt with a consent order. The parties by consent order had set aside a judgment on certain terms which later proved problematic. The consent order had included a term requiring the Sheriff, who was not a party to the proceedings, to refund sheriff fees to the defendant. The Sheriff refused. The disagreement led to an application to set aside the consent order. The Registrar found for the plaintiff and set aside the consent order. The defendant appealed. The appeal came before Mwaungulu, J. He allowed the appeal holding that:

(i)       A court has no jurisdiction to vary or set aside a consent order except by fresh action for that purpose.

(ii)      A consent order is binding on the parties and also acts as estoppel until set aside by a fresh action for that purpose.

How such an authority can be applied here eludes me.  It is true that in the process of deciding the appeal, Mwaungulu J did express the view that a consent order binds the parties to an action in the same way that a contract binds the parties to it. He further stated that in as much as privity of contract excludes all others from its purview, so too by parity of reasoning must a consent judgment. It cannot give rights or impose obligations on strangers to the cause of action in which the consent order has been signed and filed. He drew upon this rule to support his finding that the Sheriff was right in refusing to refund the fees.

In the present case, there was no consent order filed after the September 18 Agreement. These proceedings are only concerned with whether the September 18 Agreement operates so as to bar these proceedings. The principles at play are far different from the ones applied in the Shiptrade case. I will discuss the applicable principles shortly.

But before I do so, I must indicate that the defendant also relied on Zgambo v Agricultural Management Consultancy Ltd (MSCA) 1994 MLR 397 to contend that because the September 18 Agreement was performed by both parties, it is binding and effectual. The authority cited stands for the principle that where an out of court settlement was partially fulfilled, the settlement was invalid to the extent of non – performance. It was then argued that as the Agreement here was fully satisfied it is therefore fully valid.

The defendant also relied on two other cases. These are Carr v Stuart (HC) 1 ALR (M) 17 and Mwalwanda v Press Holdings Ltd (H) 10 MLR 321. The Carr case stands for the proposition that the court will construe an agreement according to its terms. Where the terms are clear and the language used unambiguous, the court will enforce those terms using the ordinary meaning of the language. In Mwalwanda v Press Holdings Ltd, VILLIERA, J held at page 327 that the general rule is that where parties have embodied the terms of their contract in a written document, verbal evidence is not allowed to be given so as to add to or to subtract from or in any way to vary or qualify the written document.

Based on these two authorities, it was contended that the September 18 Agreement is very clear in its terms. It provided that the agreement would settle all claims between the parties and therefore, I ought to dismiss the plaintiff’s cause of action on the basis that it lacks merit.

It must be remembered that civil cause number 798 of 2007 was apparently settled by the September 18 Agreement. The plaintiff sought to recover three trucks from Mr. Lidamlendo, who was the defendant in that case. The defendant in the present proceedings was not a party to the proceedings. It is not surprising therefore that the case was not formally closed. The September 18 Agreement could never have been filed to close that file.

Contrary to what the defendant argues that the September 18 Agreement stands at par with a consent order, I hold a contrary view. The September 18 Agreement can only bar these proceedings if it is regarded as an effective accord and satisfaction. Any man who has a cause of action against another may agree with him to accept in substitution for his legal remedy any consideration. The agreement is called ‘an accord’ and the consideration is called ‘satisfaction’. - See paragraph 32 - 07 Clerk & Lindsell.

Accord and satisfaction is capable of discharging a tort.  When the satisfaction agreed upon has been performed and accepted, the original right of action is discharged. The accord and satisfaction constitute a complete defence to any further proceedings upon that right of action. An accord like any other agreement is not binding unless it is supported by consideration. In D&C Builders Ltd v Rees [1965] 3 All E. R. 837 an accord was held to be unenforceable because “the agreement constituting the accord was neither under seal nor supported by consideration”

Per Winn L.J. at p 846.

Delivery of something to which the claimant is already legally entitled does not constitute a sufficient consideration. - See paragraph 32 -09 Clerk & Lindsell. In the present case, I have already found that the plaintiff was legally entitled to require the defendant to deliver the three trucks to him under the defendant’s fiduciary obligations to the plaintiff. The defendant could not transpose that obligation by introducing his father – in law into the chain of command. The plaintiff had instructed the defendant to deliver the trucks to him in Malawi. He was obliged to make the delivery. The plaintiff had not asked the defendant to deliver the trucks to Mr. Lidamlendo. Can a change of instructions to the shipping line constitute consideration?  The answer is no because the defendant was legally obliged to deliver them. Therefore this delivery constituted a nudum pactum. There was no accord and therefore the September 18 Agreement is not enforceable.

In the case of Teofilo Chilenge t/a Combinado Pesqueiro de Metangula v The Attorney General Commercial case No. 96 of 2007, Dr. Mtambo, J held that a nudum pactum is unenforceable. Its effect is merely a voluntary concession to the defendant made entirely to oblige him and of no advantage to the claimant. In the present case, the plaintiff’s journey to Durban and the defendant’s instruction to the shipping line that the trucks should be delivered to the plaintiff were a nudum pactum and I so find.

That ought to settle the position of the September 18 Agreement – the agreement is unenforceable for lack of consideration.

If I am in error in this finding, there is another reason why the September 18 Agreement cannot be enforceable. An accord must be voluntary. Where the agreement is induced by pressure, threats or intimidation........., it does not constitute a true accord which would disentitle the plaintiff from recovering the balance of the sums due or the property sought to be recovered in the proceedings. – See: D & C Builders Ltd – v Rees (supra).                

Although the D & C Builders Ltd v Rees case dealt with recovery of debts, the general principle enunciated in that case by Lord Denning remains good law and applies in the present case. He stated at paragraph 841:

in applying this principle, however, we must note the qualification. The creditor is barred from his legal rights only when it would be inequitable for him to insist on them. Where there has been a true accord, under which the creditor voluntarily agreed to accept a lesser sum in satisfaction, and the debtor acts on that accord by paying the lesser sum and the creditor accepts it, then it is inequitable for the creditor afterwards to insist on the balance.  But he is not bound unless there has been truly an accord between them”.

In the same judgment, the celebrated judge concluded by finding that there was no true accord in the words:

in the present case, on the facts as found by the judge, it seems to me that there was no true accord.  The debtor’s wife held the creditor to ransom. The creditor was in need of money to meet his own commitments, and she knew it. When the creditor asked for payment of the £480 due to him, she said to him in effect: “we cannot pay you the 480 pounds. But we will pay you £300 if you will accept it in settlement.  If you do not accept it on those terms, you will get nothing. £300 is better than nothing”.

The judge went on to say:

“but she had no right to insist on his taking it in settlement. When she said ..... ‘We will pay you nothing unless you accept £300 in settlement.” She was putting undue pressure on the creditor. She was making a threat to break the contract (by paying nothing) and she was doing it so as to compel the creditor to do what he was unwilling to do (to accept £300 in settlement).... and she succeeded”.  

I find that the defendant’s insistence requiring the plaintiff to give up the third truck in order to secure the delivery of the two trucks only as proven by document marked SKC11 to Exhibit SKC10 vitiated the accord. I also find that this agreement ought to be set aside on the principles discussed in Lloyds Bank Ltd v Bundy (1975) Q.B. 326 esp at 339 and Pao On  v Lau Yin Long [1980] A. C. 61

To sum up, I dismiss the defendant’s summons. The plaintiff is entitled to recover the truck or in the absence of the truck, the price at which the plaintiff would have sold the truck in Malawi.  At the trial, it was agreed by the parties that in the event that I find for the plaintiff, assessment of damages should be directed to take place before the Registrar. I so direct. In my view the best starting point in the enquiry to discover the value of the truck or the price at which the plaintiff would have sold the truck in Malawi is the price at which the defendant himself or Mr. Lidamlendo sold it in Malawi.

It is with regret that I note that the plaintiff has not claimed damages or interest. He has not claimed the US$2,650 pocketed by the defendant. The plaintiff did not claim expenses incurred arising from the conduct of the defendant. I will not grant these remedies to the plaintiff only because they were not asked for. The facts of this case entitled the plaintiff to all these and aggravated damages. The defendant abused his office as a fiduciary.

I award costs to the plaintiff to be taxed if not agreed.

 

MADE this 6th day of June, 2011.


________________

Mbendera, SC

JUDGE