THE REPUBLIC OF MALAWI
IN THE HIGH COURT OF MALAWI
LILONGWE DISTRICT REGISTRY
COMMERCIAL CAUSE NO. 57 OF 2015
A.G.M GAFFAR t/a CHICKEN COTTAGE………………….PLAINTIFF
CORAM: L. Mtchera, Assistant Registrar
Bonongwe, of counsel for the Plaintiff
Chagalamuka, of counsel for the Defendant
J. Ngwale, Court Clerk
ORDER ON ASSESSMENT OF INTEREST
This matter came before this court for assessment of interest pursuant to a consent judgement issued on 27th day of August, 2015. By that judgement the defendant was ordered, among other things, to pay the plaintiff the principal sum of K17,046,643.75 in equal instalments of K5,682,214.57 and costs of the action and interest at a rate to be determined and amount to be assessed by the court, if not agreed by the parties.
Evidence and Submissions by the parties
During the hearing or the assessment of interest each party called one witness. Both witnesses filed witness statements in support of their calculations of interest which they adopted during the hearing.
The plaintiff, Abdul Gassar Majid Gaffar, was the only witness for his case. He stated that he runs a food chain business called Chicken Cottage where he is the Managing Director. And following the consent Judgement which was entered herein he calculated the interest payable at the First Merchant Bank base lending rate plus 10% at K14,041,141.76 as exhibited in AG2. His justification for the 10% mark-up is that commercial banks are now charging the same to borrowers who default on repayment of their loans.
The defendant’s only witness was Zikomo Msefula, the Managing Accountant. In his statement he stated that he used the rates supplied to him by FMB and his expertise to calculate interest owed to the plaintiff. He further stated that his calculations included a mark-up of 1% above the base lending rate. He said it is normal in practice to add 1% above the base lending rate. However, when cross-examined he stated that he used the mark-up of 1% above the base lending rate on advice from counsel.
At the end of the hearing both parties agreed to submit final written submissions. However, at the time or writing this ruing only counsel for the plaintiff had submitted his final submissions.
Issues for Determination
There are two issues for determination, namely:
• What is the applicable interest rate in the circumstances?
• What is the amount payable?
The Law and Discussion
The courts Act confers jurisdiction on the High Court to direct interest to be paid on debts, including judgment debts, or on sums found du e on taking accounts between parties or on sums found to be unpaid by receivers or other person liable to account to the High Court- see section 11(a)(v) of the Courts Act. Thus, as correctly observed in the Kankhwangwa case-  MLLR 26 at 32 there are many instances in which interest is award able. The instances include, but are not limited, where it is awardable pursuant to an express or implied term of a contract, where it is awardable as a statutory requirement and or where it is awardable in the exercise of the court's equitable jurisdiction.
What then is the applicable interest rate in the circumstances?
In order to answer this question we go back to the pleadings. It is trite law that the parties arc bound by their pleadings- sec Venetian Blind Specialists Ltd v Apex Holdings Ltd  MLR 422. Hence the need for the parties to stick to their pleadings throughout the course of the case. The issue, therefore, is whether to allow interest to be assessed at the rate of 10% above the lending rate as submitted by the plaintiff or at the rate of 1% above the base lending rate as submitted by the defendant.
While appreciating that the parties are bound by their pleadings, it is important to note that the consent judgement filed and issued herein change the complexion of the pleadings. It provided, in the last paragraph, as follows:
'IT IS ALSO ORDERED that the defend ant shall pay the sheriff fees as already calculated, cost of the action and interest at a rate to be determined and amount to be assessed by the court if not agreed’. (emphasis supplied)
Thus, in view of this paragraph, the court has to come up with the rate at which interest is to be calculated and the amount payable, although the plaintiff had initially pleaded interest on the principal sum at the base lending rate plus a mark-up of 5%.
As correctly observed by both witnesses com1nerci al banks do not lend out money to their customers at the base lending rate. As financial institutions which arc in business they put a mark-up not only to cover risks but also to ensure that the get some profit from the transactions. And this court has taken cognizance or the fact that the mark-up used by commercial banks is not fixed. It fluctuates depending on market and or economic factors. Currently most commercial banks such as Standard Bank Limited and First Merchant Bank are charging 10% above the base lending rate as the mark-up.
It should be noted that the matter was commenced in April 2015 and the plaintiff must have claimed then mark-up which was prevailing at that time. However due to delays by the defendant in settling the matter fron1April 201 4 to April 2015 the mark-up n1ust have certainly gone up due to market/economic forces. Therefore, it is our considered view that the plaintiff is justified in claiming interest at the rate or 10% above the base lending rate as this is the rate one would have to borrow from commercial banks at the moment- see S.R. Nicholas Limited,. Malawi Telecommunications Limited, Commercial Cause No 37 of 2008 (unreported). Consequently, having rejected the interest rate of l % above the base lending rate proposed by the defendant, it is hereby ordered that interest be calculated at the rate of 10% above the base lending rate as sub111itted the counsel for the plaintiff.
The Amount payable
It has been noted that both witnesses exhibited in their witness statements calculations of the interest payable. The plaintiff’s calculations were based on interest at the rate of 10% above the base lending rate while the defendant's calculations were based on interest at the rate 1% above base lending rate. Suffice it to say that save for the interest rate used by the plaintiff the defendant did not have any problem with the calculations done by the plaintiff. Therefore it is ordered that the defendant do pay the plaintiff the interest as calculated by the plaintiff in the sum of K14,04 l,1 41.76 because the defendant has been wrongfully withholding the plaintiff’s money for a long time and the plaintiff has been forced to seek legal redress on the same - see Gwembere v Malawi Railways Limited, 9 MLR 369.
The plaintiff is also awarded the costs of the assessment.
Delivered in Chambers this 29th day of January, 2016.