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Ahmed and Another v Liquidator of Finance Bank (Civil Cause Number 1089 of 2008)
IN THE HIGH COURT OF MALAWI
CIVIL CAUSE NUMBER 1089 OF 2008
KADRI EJAZ AHMED…………………………….……1ST PLAINTIFF
SHETH AZIZ BHAI ISSA ……………………………... 2ND PLAINTIFF
- AND -
THE LIQUIDATOR OF FINANCE BANK
(IN VOLUNTARY LIQUIDATION)………...…………..DEFENDANT
CORAM: THE HONOURABLE MR JUSTICE J S MANYUNGWA
Mr Kasambara/Mr Chipembere, of Counsel for the plaintiff
Mr Mpaka, of Counsel for the defendant
Mr Allan Chuma – Official Interpreter
Date of hearing: 3rd June, 2008
Date of ruling: 9th July, 2008
R U L I N G
This is the defendants summons taken under Order 18r 19(1) of the Rules of Supreme Court1 and Section 247(1) of the Companies Act2, Order 1 r 4 and 6 of the High Court3 to strike out the plaintiffs’ Originating Summons on grounds of incurable irregularities being viz: the absence of an appropriate defendant in breach of section 247 of the Companies Act, 1984; the institution of the proceedings at a wrong forum contrary to Order 1 r 4 and 6 of the Rules of the High Court and for disclosing no reasonable cause of action and therefore being embarrassing for failure to plead sufficient particulars of the claim contrary to Order 7 r 2 of the Rules of Supreme Court. There is an affidavit in support of the application sworn by Mr Khuze Kapeta of the firm Bernhard and Harris Law Consultants, Liquidator who is also to be the Liquidator of Finance Bank. The plaintiffs oppose the application, and there is an affidavit in opposition sworn by Mr Edgar Baxter Kachere, who alongside Mr Kasambara is Counsel for the plaintiff. The defendant is represented in these proceedings by Mr Mpaka. The parties also filed their skeleton arguments.
In his affidavit in support of the application, Mr Khuze Kapeta depones that he is the liquidator of Finance Bank, which is a body corporate duly registered as a limited liability company, namely Finance Bank of Malawi Limited and that he was appointed at the commencement of the members voluntary liquidation of the said bank on or around 15th January, 2006. The deponent further depones that despite the liquidation process he has been informed by his lawyers that Finance Bank Limited remains a separate legal entity with full corporate powers to sue or be sued and that the liquidator therefore is in law and practice a person distinct from the body corporate. It is further deponed that although the plaintiff’s allege certain wrongs and liability against the said body corporate, they have nevertheless sued the liquidator who is a totally different person in law and in fact, and that therefore the plaintiff’s case is clearly unsustainable for not bringing the right party before the court. The deponent contends therefore that even if he was the right defendant, the plaintiff’s Originating Summons herein lays claim against the liquidator of certain unidentified funds and interest thereon at an unidentified rate on the funds such interest being for an unspecified period, and that in view of the foregoing, he believes that the Originating Summons discloses no reasonable cause of action and is embarrassing for the liquidator to plead back to. Further, Mr Kapeta states that he has gone through the plaintiff’s affidavit in support of the Originating Summons and that no where does the plaintiff’s make claim to any specific amount except for the unidentified funds. It is further stated that the deponent had under the liquidator portfolio, certain classified accounts and funds whose disbursement await fulfilment of the requirements to questions of fact by respective depositors to enable him effect transmission to a claiming depositor. It is further stated that these classified accounts and funds are characterised by matters irregular in banking and to ensure prudence in disbursement, accuracy in accounting and safeguard against fraud, attention to details of fact is entrenched in managing these assets under liquidation. The deponent therefore contends that if the plaintiffs had sufficiently particularised their respective claims in the originating Summons he would have been in a position to know if their particular claims relate to the classified accounts or funds or otherwise so that the liquidation process is given its efficacy. It is further contended on behalf of the defendant that while the Originating Summons lays claim to nothing but and presumably the unidentified funds, and that the accompanying exhibits which allegedly show the deposits of the funds and that the amounts so deposited are way in excess of MK1, 000,000.00 and that the plaintiffs’ claim therefore exceeds MK1, 000,000.00 arising from a banker/customer business relationship. The deponent therefore contends that this is a commercial matter on which this court has no jurisdiction. The defendant therefore prays that Originating Summons be struck – off.
As I indicated earlier, the plaintiffs’ oppose the defendant’s summons and there is an affidavit in opposition sworn by Mr Edgar Baxter Kachere who contends that the affidavit in support of the summons to strike out Originating Summons is not sustained both in fact and in law as the defendant is relying on Section 247 of the Companies Act, 1984 which provides that the corporate state and corporate powers of the company, upon liquidation shall continue until it is dissolved. Further, that Section 275 of the said Companies Act expressly provides that any person aggrieved by any act or decision of the liquidator may apply to the court which may confirm or reverse or modify that act or decision complained of and make such an order as it deems just and that the plaintiff’s herein are at liberty to make the application by Originating Summons to this court. Mr Kachere further contends in his affidavit that the plaintiffs’ application is based on the liquidator’s overt acts of refusal to release funds deposited in their accounts with Finance Bank of Malawi Limited; that the liquidator has, despite numerous efforts on the part of the plaintiffs to resolve the matter herein, ostensibly denied the plaintiffs’ their right to access their own funds as is clearly evident from exhibit ‘EBK1’ which is a letter from the liquidator, Mr Khuze Kapeta, dated Wednesday, 12th March, 2008 addressed to Messrs Edgar and David, Legal Practitioners for the plaintiff’s. The said letter was in the following terms:
(In Voluntary Liquidation)
P.O. Box 31031
Edgar and David
P.O. Box 30559
Re: KADRI EJAZ AND SHETH AZIZ BHAI ISSA
We thank you for your letter of 6th March 2008 that you have been retained by the two depositors of funds to claim payment of the purported deposits to them. We trust that they have made available to you our letters to them dated 21st May, 2007 to enable you have a meaningful discussions with us upon confirmation of the arrangements.
For purposes of ease of reference, we attach hereto a copy of our letter of 21st May 2007 to Mr Issa which is self – explanatory.
Incidentally, we have also received from your clients a letter dated 4th March, 2008 which has been copied to the state machinery and we trust that the reactions from those institutions, will be communicated to us at an appropriate time
Enclosed in exhibit EBK1 was a letter dated 21st May 2007 from the liquidator, Finance Bank, addressed to Mr Sheth Aziz Bhai, which read as follows:
(In Voluntary Liquidation)
P.O. Box 31031
Monday, May 21, 2007
Mr Sheth Aziz Bhai
P.O. Box 1387
Dear Mr Bhai
CLAIM OF DEPOSITS
We received your claim forms for various amounts held in accounts at Finance Bank (as it was then) and please be informed that we are proceeding the claims. In the meantime may we request you to supply disbursements.
You will recall that the accounts were classified consequent upon the Reserve Bank taking superintendence of Finance Bank in May 2005. Most critical historical information on your accounts was collected by the Reserve Bank in pursuit of regulatory exercises which had been triggered by similar accounts which were later designated classified thereby incapacitating the liquidator in performance of his duties as sought by your goodselves at this stage of the liquidation and although we have written to Reserve Bank, for documentation, you may readily make these available to us, only if to assist in prompt execution of our duties.
Copies of deposit slips of the monies deposited with the bank for relevant sums
Where transactional documents were evidenced by certificates of deposit, make copies available to us
Copies of documents when you ‘first’ or otherwise established the said accounts at the bank
Copies of the mandates which were associated with the establishment of current accounts or such transactional documents as may be under your custody or possession.
We will require these documents or copies thereof to assist us in correctly establishing that these were mapped into the bank’s system and conclusively establish that verification be in concurrence with the transactional trend. Your immediate performance of our request will avoid undue delay in the performance of the corresponding obligation to you.
Within acceptable limits we do exercise latitude but the information sought is exclusively critical for as full proof disbursement of funds to claimants and, in the magnitudes stated, we have no choice.
As a concurrent issue the liquidation process does not transfer funds to third party accounts and we will be obliged to ask you to provide new information on this aspect unless it is confirmed to us that the depositor has since traded in a new style and relevant documents would therefore be required as a must.
We look forward to receiving your urgent cooperation.
ISSUE(S) FOR DETERMINATION:
The main issues for the determination of this court are:
whether the plaintiff’s Originating Summons should be struck of on grounds of:
Absence of an appropriate defendant
That the proceedings were instituted at a wrong forum
That the Originating Summons disclosed no reasonable cause of action:
Before I proceed I must sincerely acknowledge the efforts of counsels in articulating the principles of law applicable for which I am greatly indebted. Whilst I shall endeavour to keep the same in my mind when making my ruling, I must however state it may not be possible for me to recite every argument advanced by either Counsel in the course of this ruling. This will not be out of disrespect to Counsel but shall be due to brevity.
The plaintiffs’ commenced this action against the defendant, namely, The Liquidator of Finance Bank Malawi Limited, a company that is in voluntary liquidation. Section 204 of the Companies Act1 provides that the winding up of a company may either be (i) the court or (ii) voluntary. The said Section is in the following terms:
S204(1) “The winding – up of a company may be either
By the court
And according to Section 211 of the Companies Act the provisions of Section 212 to 243 of the Act, apply to cases of a winding up of a company by the court. The said Section 211 is in the following terms:
S211 “The provisions of Sections 211 to 243 shall apply in the case of the winding up of a company by the court”.3
In terms of voluntary winding – up, there are two types of voluntary winding – up.
Members voluntary winding – up
Creditors voluntary winding – up
The provisions of Section 254 to 248 of the Act apply to every creditors’ voluntary winding – up whilst the provisions of Section 250 to Section 252 apply to every members voluntary winding – up. The company herein is in members voluntary winding up.
It must be understood that when a company is registered, under Section 15(2) of the companies Act, it becomes a separate legal entity from the members capable of exercising all functions of a body corporate including the power to bring or defend an action. The said Section provides:
“From the date of incorporation mentioned in a certificate of incorporation, the subscribers of the memorandum, together with such other persons as may from time to time become members of the company, shall be a body corporate by the name contained in the memorandum capable forthwith of exercising of exercising all the functions of an incorporated company, having pertual succession and power to hold land”.
See also the case of Salomon V Salomon1 and Gowers Principle of Company2 Law. However, it must be appreciated that although Section 15(2) of the Companies Act provides that a body corporate has perpetual succession, the effect of the process of liquidation whether voluntary or voluntary is that the company ceases to carry on its business though the corporate state and powers of the company shall continue until it is dissolved. This is provided for under Section 247 of the Act.
S247 “The company shall from the commencement of the winding – up cease to carry on its business, except so far as in the opinion of the liquidator is required for the beneficial winding – up thereof, but the corporate state and corporate powers of the company shall continue until it is dissolved”.3
And my brother learned Mtambo, J in the case of Speedy’s Limited V Liquidator of finance Bank of Malawi Ltd4 ably laid down the position of the law, which I agree with when he said:
“Since the corporate state and corporate power continue even after commencement of the process of liquidation but before dissolution, the proper defendant in any proceedings against a company in liquidation is the company itself and not the liquidator. But the liquidator is the one to defend the action not in his own name but in the name of the company in view of Section 230(2) of the Companies Act which provides:
‘The liquidator may –
Bring or defend any action or legal proceedings in the name and on behalf of the company
And the leave of the court is not required to bring an action against a company in voluntary liquidation although such is required with respect to a company in compulsory liquidation. This is by virtue of the fact that Section 222 of the Companies Act which provides that no action or proceeding shall be proceeded with or commenced against a company in liquidation without the leave of the court falls under part B which deals with a winding up by the court. However, the liquidator would be a proper defendant where the action is based on Section 275 of the Companies Act which provides:
‘Any person aggrieved by any act or decision of the liquidator may apply to the court which may confirm, reserve or modify the act or decision complained of and make such order as it deems fit”.(emphasis mine)
It must however be noted that despite the fact that the title in the margin Section 275 of the Companies Act reads: Appeal against the decision of the liquidator the body of the section itself contains the word apply and not appeal. Therefore where the action is based on Section 275, the correct mode is not to appeal but to apply. As was stated by Mtambo J in Speedy’s Limited V Liquidator of Finance Bank of Malawi Limited he said, when faced with a similar question
“It is my considered view that the law is to be found in the body of the provision [Section 275] and not the margin. Therefore one only needs to apply to the court and not appeal whenever they are aggrieved with the liquidator’s decision. As there is no prescription in the mode of commencement of an application, a party may choose any of the permissible mode under Order 2 Rule of the High Court Commercial Division Rules such as by way of Originating Summonses”.
Further, under the equivalent English Company Law of Companies Act 1908 and 1948, there is no requirement for obtaining leave for the before commencing an action in members voluntary liquidation see: E V Lord Mayor of London ex – parte Boaler1 and In Re: Sounders (A Bankrupt)2.
In the instant case the liquidator is being sued to account for the money that he had received and state the correct amount due to the plaintiffs’ by him. Thus in a case of liability to account the liquidator just like a receiver is liable to be sued in that capacity see: Smart V Flood3, Walton(ed), Kerr on Receivers4. It is therefore my finding that the liquidator in the instate case is a proper party to be sued. As a matter of fact, I am surprised that the liquidator is raising this issue because in the earlier case of Speedy’s Ltd V Liquidator of Finance Bank Malawi Ltd5 the liquidator in that case did not dispute the capacity in which he was being sued let alone did the court raise it as a substantive jurisdictional or capacity. On my analysis of the law, it is my finding that the proper party in this matter is the liquidator. See also Kankhwanga V Liquidator of Import and Export Malawi Ltd.
As to the question that the proceedings were instituted at the wrong form, my understanding is that the plaintiff and the liquidator are not in a commercial relationship but are challenging the failure by the liquidator to do his job. That takes the matter, in my view out of a commercial relationship. Had it been that the plaintiff was suing the bank, the situation would have been different, it would have been commercial. Further, it should be pointed out that the High Court had unlimited Original jurisdiction as is provided in Section 108 of the Constitution:
S108 “There shall be a High Court for the jurisdiction which shall have unlimited original jurisdiction to hear and determine any Civil or Criminal proceedings under any law”.
It therefore follows that Section 108 being a Constitutional provision, this court has the jurisdiction to hear this case.
As regards the mode of commencement it is my considered view that the plaintiff correctly followed the correct procedure by commencing the proceedings by way of an originating summons. Further under order 15 rule 3 of the Rules of Supreme Court 1965 it stipulates that:
“Proceedings by which an application is to be made to the High Court … under any act must be begun by originating summons except where by these rules or by or under any Act the application in question is expressly required or authorised to be made by some other means”.
It should further be noted that the power to stay or dismiss an action under the inherent jurisdiction of the court on the ground that it is obviously frivolous or vexatious and thus an abuse of the court process is discretionary. In the instant case I do not find that the appellants Originating Summons in view of the foregoing is frivolous or that it is an abuse of the court.
In these circumstances, it in my considered opinion that the defendant’s summons to strike out the plaintiff’s Originating summons has not been made out and I therefore dismiss the same with costs to the plaintiff. The matter is adjourned to the 31st day of July 2008 for hearing on the same directions that the court gave on 6th May 2008. The said directions are with effect from today, the 09th July 2008.
Pronounced in Chambers at the Principal Registry this 09th day of July, 2008.
Joselph S Manyungwa
1 The Supreme Court Practice 1999
2 The Campanies Act, Chapter 46.03
3 High Court (Commercial Division) Rules
1 Companies Act, Chapter 46:03
2 Section 204 of the Companies Act
3 Section 211 of the Companies Act
1 Solomoni V Solomon & Co. AC 22
2 Gower L. B. C. Gowers Principles of Company Law, London, Steven & Sons 1979 p103 - 104
3 S 247, Companies Act
4 Speedy’s Limited V Liquidator of Finance Bank of Malawi Limited Civil Cause Number 49 of 2007(unreported)
1 R V Lord Mayor of London ex – parte Boaler 2QB 146
2 In Re: Sounders, (A Bankrupt) 1977 ch.60
3 Smart V Flood (1883) 49 LT (NS0 467
4 Walton (ed), Kerr on Receivers 2nd Edition
5 Speedy’s V Liquidator of Finance Bank (supra)