A.H. Mahommed t/a Project Building Contractors (Commercial Case No. 29 of 2016) [2017] MWCommC 6 (27 October 2017);

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IN THE HIGH COURT OF MALAWI

COMMERCIAL DIVISION

Blantyre Registry

Commercial Case No. 29 of 2016

(Before Honourable Justice Sikwese)

BETWEEN

A.H. MAHOMMED t/a PROJECT BUILDING CONTRACTORS             PLAINTIFF

AND

ATTORNEY GENERAL (MINISTRY OF HEALTH)        DEFENDANT

CORAM: D.H. SANKHULANI, ESQ., ASSISTANT REGISTRAR

M/s Gondwe and Chipembere, of Counsel for the Plaintiff M/s Mlenga and Maulidi, of Counsel for the Defendant Mr. Makombe, Court Clerk

Sankhulani, AR

RULING ON ASSESSMENT OF INTEREST

 

Introduction

This ruling on assessment follows hearing of proceedings for assessment of interest that was held pursuant to a judgment on admissions that was entered herein.

Background Information

The Plaintiff commenced the present action by way of writ of summons, claiming, inter alias, money owed to it by the Defendant in respect of services for the construction, rehabilitation and maintenance of buildings that it had provided to the latter. The Plaintiff also claimed, amongst yet other claims, interest on the aforesaid owed money. The Defendant duly filed its defence.

Subsequently, on the Plaintiffs application, judgment on admissions was entered in the Plaintiff's favour for the sum of US$ 158,333.49, interest thereon, legal collection costs and costs of this action.

Accordingly, proceedings for assessment of interest were commenced. Hearing of the proceedings for assessment of interest took place in the presence of both parties hereto. After the said hearing, the matter was adjourned to today's date for an order on assessment of interest. Hence the present ruling.

Issues for Determination herein

•             Whether it is competent for this Court to award interest at the prevailing commercial borrowing rate for Kwacha on a judgment debt in foreign currency.

•             Whether the 10% margin is payable herein.

•             Whether an order on assessment ought to be made herein.

Whether it is Competent for this Court to Award Interest at the Prevailing Commercial Borrowing Rate for Kwacha on a Judgment Debt in Foreign Currency

The contract price herein was in United States Dollars. As it may be appreciated from the above background information, the judgment on admissions herein was entered for a sum expressed in United States Dollars. In his calculations of interest, the Plaintiff firstly converted the principal sum from United States Dollar to Malawi Kwacha. It was, accordingly, the Defendant's submission that it is incompetent for this Court to award interest at the prevailing commercial borrowing rate for Kwacha on a judgment debt in foreign currency. According to the Defendant, interest payable herein should be calculated at a rate applicable to any United States Dollar account held by any commercial bank in Malawi.

However, having given this issue a careful thought, I am unable to subscribe to the Defendant's position/submission. I furnish my reasons. According to the statement of claim herein, interest was to be as per the conditions of contract between the parties herein. By the aforesaid judgment herein, interest was to be according to the conditions of the contract between the parties herein. I take judicial notice of the General Conditions of Contract between the parties herein, exhibited to the affidavit in support of the application for judgment on admissions herein and marked as 'AHM 1'. According to Clause 79.1 of the aforesaid General Conditions of Contract, interest is to be calculated at the prevailing rate of interest for commercial borrowing for each of the currencies in which payments are made. Most importantly, Clause 82.1 of the said General Conditions of Contract stipulates that payments shall only be made in Malawi Kwacha. What that clause means is that, although the contract in issue herein was in United States Dollars, all payments, whether for the contract sum or of interest, had to be in Malawi Kwacha using the applicable exchange rate of the United States Dollar to the Malawi Kwacha on the date of such payment. I so opine and find. In my most-considered opinion, therefore, the Plaintiff herein was justified in doing all calculations of interest in Malawi Kwacha. Moreover, I find the Defendant not to have made out its case for the adoption of a different formula from the one employed by the Plaintiff. The Defendant should have told this Court what its proposed formula for calculation of interest is. Unfortunately, that was not done. Better still, the Defendant should have brought a witness who would then have filed a witness statement to which calculations of interest based on its proposed formula would have been attached. That course of action would have demonstrated to this court how the formula works and why the same should be adopted. That omission renders the Defendant as having failed to make out its case.

In view of the foregoing reasoning and findings, I finally find that it is competent for this Court to award interest at the prevailing commercial borrowing rate for Kwacha on a judgment debt that is in a foreign currency. The Plaintiff was justified in calculating interest using the formula it employed, save for the inclusion of a 10% margin as will be shown below.

Whether the 10% Margin is Payable Herein

In calculating interest herein, the Plaintiff adopted the effective rate of 10% above FDH Bank's applicable base lending rates depending on the specific time of the period in issue herein. The Plaintiff got the FDH Bank's base lending rates from a document on history of lending rates from the said bank that has been exhibited as 'JMC 2' to an affidavit in support of the assessment sworn by one Joster Mwazani Chisale. The Defendant is against that 10% margin.

I totally agree with the Defendant on this issue of 10% margin. To begin with, the contract between the parties herein did not provide for the 10% margin. Additionally, the Plaintiffs statement of claim herein did not plead the 10% margin. Most importantly, the judgment herein did not provide for the 10% margin. It follows, therefore, that it was clearly irregular, if not unlawful, for the Plaintiff to adopt the said 10% margin instead of just the applicable base lending rates. I so opine and find.

In view of the immediately foregoing finding, I am of the considered view that an order on assessment ought not to be made herein, since the Plaintiff had used a partly-flawed method of calculating interest.

Final Order

I, therefore, hereby set aside hearing of the assessment proceedings that was held herein on 13th October, 2017. The Plaintiff shall cause to be issued a fresh notice of assessment of interest, after redoing calculations of interest in a way that effectuates the above findings.

Each party herein shall bear their own costs of the just-set aside hearing of assessment proceedings.

Delivered in Chambers at Blantyre Registry of the Commercial Division of the High Court this 27th day of October 2017.