Helio Courvoisier SA v Malawi Posts Corporation (16 of 2015) [2016] MWCommC 496 (08 June 2016);

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IN THE HIGH COURT OF MALAWI

COMMERCIAL DIVISION

BLANTYRE REGISTRY

COMMERCIAL CASE NUMBER 16 OF 2015

 

HELIO COURVOISIER SA                                                                        PLAINTIFF

VERSUS

MALAWI POSTS CORPORATION                                                          DEFENDANT

 

CORAM: HON. JUSTICE J. N. KATSALA

                M. Sauti Phiri, of counsel for the plaintiff

                C. Khondiwa, of counsel for the defendant

                E. Gwedeza, Court Clerk

 

Introduction

RULING

This is the plaintiffs application for judgment on admissions in the sum of Swiss Francs (CHF) 215,117.89 (being the equivalent of US$227,001) being the balance on the price of goods sold and delivered by the plaintiff to the defendant. The application is supported by an affidavit sworn by Mr Maziko Sauti Phiri, counsel for the plaintiff. The defendant opposes the application and has filed an affidavit to that effect sworn by its counsel, Mr Chikondi Khondiwa

Background

By a writ of summons and statement of claim filed on 21 January 2015 the plaintiff claims the sum of CHFl 11,220.90 (Swiss Francs) being the balance on the price of goods sold and delivered to the defendant on divers dates between 5 March 1998 and 24 November 2000. The plaintiff also claims CHF153,404 being simple interest on the claim amount at the rate of 6.5% per annum. When the plaintiff served the writ and statement of claim in this matter, the defendant served a defence wherein it denies owing the sums claimed and also avers that the plaintiff s claim is statute barred having been commenced more than six years after the cause of action arose. In its amended reply to the defence, the plaintiff avers that the claim is not statute barred because the defendant acknowledged the debt in its audited balance sheets for the financial years up to 30 June, 2014. In the alternative, it is alleged that the defendant fraudulently or mistakenly informed the plaintiff that it had paid the debt through three local banks thereby leading the plaintiff to believe that the payments had been misdirected only to discover in October 2014 that the defendant had in fact not made the payments. As such the plaintiff is entitled to seek relief on account of such fraud or mistake.

Plaintiff's case

It is the plaintiff s case that the defendant in its audited statement of financial position (also known as balance sheet) for the financial year ended 30 June 2012 acknowledged the existence of trade and other payables, which included foreign creditors. A breakdown of the 'foreign payables' contained in a Foreign Creditors Listing journal as at 30 June 2009, 2010, 2011 and 2012 shows that the defendant owes the plaintiff the sum of USD227,001. The audited accounts were signed by the directors of the defendant. The plaintiff has exhibited a copy of the audited financial statements for the year ended 30 June 2012, and the aforesaid Foreign Creditors Listing journals. The plaintiff therefore argues that the defendant, having so acknowledged its indebtedness to the plaintiff, the limitation period started running from the date of the last acknowledgement, that is, 30 June 2012. As such, the plaintiff s action herein is not statute barred. The plaintiff thus applies for judgment on the basis of the acknowledgements aforesaid. The plaintiff has referred this court to the decision of the Supreme Court of Appeal in Hero Export Ltd v Navim Verma and another MSCA Civil Appeal Number 32 of 2010 (unreported) where it is alleged to have been held that the inclusion of a debt in a balance sheet of a company is an acknowledgement of the debt by the company.

Defendant's case

On the other hand, the defendant's case is that under Order 27, rule 3 of the Rules of the Supreme Court a party can apply for judgment on admissions of fact only if such admissions are made directly to the party making the application. Otherwise the application cannot succeed. In the present case the financial statements were never directly communicated to the plaintiff so as to sustain the plaintiff s present application. Further, though the admissions sought to be relied on may be express or implied, it is also a requirement that the admissions must be clear. The defendant thus submits that the fact that a party indicates an amount payable in its financial statements is not a clear admission that the amount must be paid, and that even if it were correct that such indication amounts to an admission, the plaintiff s application would be caught by the defendant's defence of limitation. The defendant has cited the cases Murphy v Culhane [1976] 3 All E.R.533, Ellis v Allen [1941] I Ch. 904 and Technistudy v Kelland [1976] 3 All E.R. 632, in support of its arguments.

Law and analysis

The starting point should be a look at the relevant provisions of the Limitation Act. The plaintiff s claim is founded in contract for the sale of goods. In terms of section 4 (1) of the Act it ought to have been commenced within 6 years from the date the cause of action arose. According to the information before this Court, the action ought to have been commenced, latest, by 24 November 2006. Thus there is agreement between the parties that the action was commenced more than 6 years since the cause of action arose. However, as already stated the plaintiff seeks to rely on the defendant's acknowledgement of the debt in its (defendant's) balance sheets as having extended the limitation period.

Section 22 (4) of the Limitation Act makes provision for the fresh accrual of an action following an acknowledgment or part payment of a debt. It provides as follows:

"Where any right of action has accrued to recover any debt or other liquidated pecuniary claim, or any claim to the personal estate of a deceased person or to any share or interest therein, and the person liable or accountable therefor acknowledges the claim or makes any payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment:

Provided that a payment of a part of the rent or interest due at any time shall not extend the period for claiming the remainder then due, but any payment of interest shall be treated as a payment in respect of the principal debt."

And section 23 provides:

"(1) Every such acknowledgment as is mentioned in section 22 shall be in writing and signed by the person making the acknowledgment.

(2) Any such acknowledgment or payment as is mentioned in section 22 may be made by the agent of the person by whom it is required to be made to the person, or to an agent of the person, whose title or claim is being acknowledged or, as the case may be, in respect of whose claim the payment is being made."

In Jones v Bel/grove Properties Ltd [1949] 1 All E.R 498 it was held that a balance sheet, which had been signed by directors and accountants of a company with the authority of the company and showed an item of GBP7,638 as due to "sundry creditors" and was presented to a shareholders' meeting at which the plaintiff was present, was capable of constituting a good "acknowledgment" within the Limitation Act 1939, since the plaintiff had established by evidence that he was one of the "sundry creditors" referred to in the sum of GBPl,807. Similarly in In re Gee & Co. (Woolwich) Ltd [1975] Ch. 52 it was held that a company's balance sheet, signed by its directors, was capable of being an effective acknowledgment of the state of the company's indebtedness as at the date of the balance sheet, so that the cause of action should in an appropriate case be deemed to have accrued as at that date. The two trustees of the claimant estate had both been present at the company meeting at which the relevant accounts were presented, so there was no doubt that the acknowledgment had been made to them.

However, these cases involved where the creditor was a shareholder of the company and received the balance sheet in that capacity. In the present case, the plaintiff is not a shareholder of the defendant. The plaintiff is an ordinary business creditor. The evidence before me shows that the plaintiff only came to know about the alleged acknowledgment in the balance sheets after the action herein had already been commenced and the defendant had already served a defence pleading the limitation period. The issue before me is whether in the circumstances the plaintiff s cause of action can be deemed to have accrued on the date of the balance sheet.

In Hero Export Ltd and others v Verma tla Vermac Agencies MSCA Civil Appeal No. 32 of 2010, a case which the plaintiff has sought to rely on, the Supreme Court of Appeal considered sections 22 (4) and 23 of the Limitation Act, which are couched in exactly the same words as sections 22 (4) and 23 of the Limitation Act 1939 (UK) (which were considered in the aforementioned cases of Jones v Bellgrove Properties Ltd and In re Gee & Co. (Woolwich) Ltd (supra)). The admissions or acknowledgment of the debt were in the minutes of the meetings of the parties and also made by the second respondent who was held to be a partner and agent of the first respondent. The court was referred to the above English cases and had this to say:

"Let us clarify the reference to balance sheets. The court in the Re Gee & Co (Woolwich) Ltd (supra) reviewed several cases in which acknowledgment of debt was pleaded. Most of the cases involved balance sheets of companies. The general view taken by the courts, in those cases, was that it was sufficient if the document acknowledged the existence of a debt. It was also the view of the courts, that, it would, ordinarily, suffice if the one who wrote or signed the acknowledgment was not himself or herself the beneficiary: for example company directors acknowledging a company's liability to themselves, see: Re The Coliseum (Barrow) Ltd [1930] All ER Rep. 221. We do not think that arises in the present case. The Respondents were the debtors, they were not benefiting anything by acknowledging the debt. They admitted that which was to their detriment."

In my considered view the decision of the Supreme Court of Appeal in the Hero Export case does not offer any guidance on the issue before this Court. The court did not discuss the issue of an acknowledgment contained in a balance sheet. In fact the court clearly stated that that issue was not before it. It was dealing with where the acknowledgment was in the minutes of meetings between the creditor and the debtor. With the greatest respect, that decision cannot be taken as the authority for the position advanced by the plaintiff in the present case. Likewise I do not find the cases of Murphy v Culhane [1976] 3 All E.R.533, Ellis v Allen [1941] 1 Ch. 904 and Technistudy v Kelland [1976] 3 All E.R. 632 cited by the defendant to be of any assistance in as far as the issue before this Court is concerned.

In re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1980] 1 Ch. 146 at 193 - 194 Slade, J. said:

"In my judgment, though no authority has been cited to me which either confirms or rejects such proposition, a written acknowledgment cannot be said to be "made to" a creditor or his agent, within the meaning of section 24 (2) unless either (a) it is delivered to the creditor or his agent by or with the authority of the debtor or his agent or (b) it is expressly or implicitly addressed to and is actually received by the creditor or his agent.

In my judgment, in case (a) it would not matter that the acknowledgment was not, according to its terms, expressly or implicitly addressed to the recipient. In case (b) it would not matter that the acknowledgment reached the hands of the creditor otherwise than by or with the authority of the debtor. In either case, however, it would be necessary that the creditor should actually receive the acknowledgment before he could rely on it.

A company's balance sheet must in my judgment be regarded as implicitly addressed to (among other persons) those creditors whose debts are referred to in it. It follows that in my judgment .....an effective "acknowledgment" of a debt must be said to have been "made" by the company to any creditor who can establish by appropriate evidence that (i) he has actually received, from whatever source, a copy of a balance sheet of the company, signed by directors of the company and referring to "sundry creditors"; (ii) he is one of the "sundry creditors" so referred to. In such circumstances the balance sheet of the company would constitute an effective acknowledgment of the relevant debt, not as at the date on which it was actually signed by the directors or received by the creditor, but as at the date of the balance sheet, being the date to which the signature of the directors related; and the cause of action would be deemed to have accrued at that date..."

In the absence of any authority to the contrary I am persuaded by this dictum. The plaintiff got hold of the defendant's financial statements wherein the statement of financial position (balance sheet) shows that as at 30 June 2012 the defendant had "Current liabilities" in the sum of Kl ,421,586,610 out of which the sum of Kl,336,303,811 related to "Trade and other payables". Under Note 10 to the Financial Statements a breakdown of the "Trade and other payables" is given which shows that a sum of K90,296,465 is for "Foreign payables". A "Foreign Creditors Listing" as at 30 June 2012 lists down the defendant's foreign creditors and the amounts owed to each one of them. This list shows that the plaintiff is owed USD227,001. The defendant does not dispute the financial statements or that the directors had power to bind the company in signing the statements. From the foregoing it is clear to me that the defendant dully acknowledged in the statement of financial position (balance sheet) that it owed the plaintiff the sum of USD227,001 as at 30 June 2012. It does not matter that the acknowledgement is contained in a note to the financial statements because the notes are part and parcel of the statements; see Ledingham v Bermejo Estancia Co. Ltd [1947] 1 All E.R. 749.

Section 182 (1) of the Companies Act charges the directors of a company to cause to be prepared and sent to all members of the company and to every holder of debentures of the company a copy of the profit and loss account (statement of comprehensive income) and balance sheet (statement of financial position) duly signed by the directors. These statements must be prepared and signed in accordance with sections 183 to 186 of the Act. Section 183 (3) of the Act provides that the profit and loss account must give a true and fair view of the profit or loss of the company for the period it relates to. Likewise, section 184 (1) provides that a balance sheet must give a true and fair view of the state of affairs of the company as at the end of the company's financial year. I am sure that the intention of the law is to ensure that financial statements give a correct position of a company as at the date of the statements. It should therefore follow that if the balance sheet shows that the company is indebted to another person for so much such entry must be a true acknowledgment of the debt otherwise it would not have found a place in the balance sheet. In other words, if it were not an acknowledgement of the debt then why would it be included in the balance sheet?

As earlier observed, the plaintiff is not a shareholder of the defendant nor is it a holder of a debenture of the defendant. Thus, the defendant was not obliged to send to the plaintiff a copy of

the financial statements. However, as stated by Slade J in the dictum quoted above, a company's balance sheet is implicitly addressed to, among others, the company's creditors whose debts are referred to in the balance sheet. Therefore, the defendant's statement of financial position was implicitly addressed to all its creditors which include the plaintiff. In the circumstances, I find that the plaintiff having come into possession of the financial statements is legally entitled to rely on the statement of financial position as an acknowledgment of the debt herein as at the date of the financial statements. It is therefore my judgment that the plaintiff s claim is not statute barred. In terms of section 22 (4) of the Limitation Act the limitation period started running from the date of the last acknowledgment of the debt, 30 June 2012. The action is within the limitation period since it was commenced on 21 January 2015, which is less than six years from the date of the acknowledgment.

Further, the defendant having so acknowledged being indebted to the plaintiff in the sum of USD227 ,001 I do not think there can be any defence to the claim in the present action, the sum of CHF l11,220,90, which is less than the amount acknowledged. In any event, the defence served does not raise any other ground apart from the statutory limitation period. The defendant does not allege payment of the debt. In view of my finding above, the defence, in as far as the principal debt is concerned, cannot stand. It automatically falls off. In terms of Order 27, rule 3 of the Rules of the Supreme Court, the plaintiff is entitled to judgment. Therefore, I enter judgment in favour of the plaintiff for the sum of CHF 111,220,90, being the amount claimed in the statement of claim. However, I do not think the same can be said in relation to the claim for interest in the sum of CHF153,404 . The defendant denies being liable to the plaintiff in respect of interest. In my considered view, there is need for the claim to be proved. This can only done through evidence which, obviously, I do not have before me at this stage. In the circumstances, it is necessary that this claim must go to trial, if the plaintiff is so minded. And I so order.

The plaintiff has also claimed for debt collection costs. There is no dispute in my mind that this claim entirely hinges on the claim for the debt. If the claim for the debt succeeds the claim for collection costs automatically succeeds. I do not think there is need for proof of this claim since it is a statutory claim that becomes payable on the successful collection of a debt; see Table 6 of the Legal Practitioners (Scale and Minimum Charges) Rules under the Legal Education and Legal Practitioners Act and B P Malawi Ltd v Riaz Muhamed t/a Ninkawa Bulk Logistics Commercial Cause Number 160 of 2010 (unreported). Following the entering of judgment in favour of the plaintiff herein then automatically the plaintiff is entitled to collection costs at the rate of 15 per cent of the judgment sum of CHFl 11,220,90 on a sliding scale as prescribed in the aforesaid Table 6. I therefore award these collection costs. The plaintiff is also awarded costs of this application. Made at Blantyre this 8th day of June, 2016.

_________________

J N KATSALA

JUDGE