CDH investments Bank LTD v FN investments, Andrew Mumba t/a Blackson Investments and World Vision Malawi [2023] MWCommC 3 (23 March 2023)

Commercial Cause No. 259 of 2017 ee being consolidated with Commercial Case Numbet-292.0% 2017) BETWEEN “CDH INVESTMENTS BANK LTD....---- oo cceceremnatnantusesnsenn CLAIMANT AND ENN INVESTMENTS. «cssesersesersenssrstete ttt 1S’ DEFENDANT ANDREW MUMBA t/a BLACKSON INVESTMENTS.....---+- 28° DEFENDANT WORLD VISION MALAWL....--ssssserereesrrsr see 382 DEFENDANT Coram: Manda, J Dossi for the Claimant Soko for the 3" Defendant M. Kachimanga Court Clerk/Interpreter RULING This is the third defendant’s application to have the claimant’s claim against them struck out for being frivolous and vexatious. The application was responded to by the claimant. The brief facts of this case are that the claimant is an investment bank while the 1° and 2” defendants are business entities. The third defendant is an international NGO. By separate agreements, the 1* and second defendants were awarded contracts of supply by the 3 defendant. Needing finance for those agreements, the 1“ anc 4! defendant individually approached the claimant bank for loans and were duly given the said loans (ME15 Million and MK 16 Million, respectively). It was a further agreement between the claimant and the 1* and 2™ defendant that the proceeds of the contract with them and the 3“ defendant would be assigned to the claimant. in this regard the claimant and the 1* and 2 defendants executed assignment of proceeds agreements, respectively. The essential element of these assignment agreements were that the 1" and 2™ defendants agreed that whatever they were going to be paid by the 3" defendant would be paid directly to the claimant. It was further the claimant’s contention that the 3° defendant did acknowledge the assignment agreements and guaranteed the same. As it turned out, the 1* and 2™ defendants defaulted on the loans. This was on account that the money of the proceeds of sale was paid directly to them and not to the claimant bank as per the assignment of proceeds agreement. In view of this, the claimant went on to sue the 1* and 2” defendant in two separate actions. The claimant then also added the 3% defendant to those actions, which actions were then later consolidated into this action. In this application, it is the 3" defendant’s argument that it was not privy to the assignment contracts between the claimant and the 1* and 2™ defendants and thus cannot be held liable under the same. Secondly, the 3 defendant also argued that they did not guarantee the performance of the stated assignment agreements as they did not sign an accessory OF collateral contract promising to be answerable for the default of the 1* and second defendants. While agreeing that the 3" defendant was not privy to the contracts of assignments, it was the claimant’s contention that the 3% defendant did acknowledge the said contracts and that they indicated that such acknowledgment was valid and binding. The paragraph which the defendant sought to rely on is contained in letters which the 3" defendant wrote to the claimant with regards the assignment contracts which were executed by the 1* and 2™ defendant. I think for better context I need to reproduce the whole letter. The letters (exhibited as RV3 and RV4 and attached to the sworn statement of Ruth Vilili), are essentially the same and read as follows: “We acknowledge receipt of this Notice of Assignment dated 28" May, 2014, referring to an assignment between FN Investment {Blackson Investments} (the “Customer”) and you, as adequate notice of the assignment of the Customer’s right, title, benefit and interest in respect of LPO Number 009192 {009470} being the contract (as defined in the Notice), and consent to that assignment We confirm that we have not received notice of the interest of any third party in the Contract. We further confirm and acknowledge that we do not have of set-off or counterclaim in relation to the contract and that we are not aware of any breach of the contract or grounds upon which we are entitled to rescind the Contract (in whole or in part). We confirm that we shall accept your instructions in relation to the Customer’s rights under the Contract, and shall disclose to you such information in relation to che contract as you may, at any time and from time to time, request. We further confirm that we have received invoice number 044 dated 22™ April, 2014 {invoice number 4536524 dated 16" May, 2014} and shall make full payment of MK25, 000, 000 (Twenty five milion kwacha only), under the contract in accordance with your instructions (i.e. we expect fo issue the payment not later than 3 1* July 2014) We confirm that we are a company duly incorporated under the laws of Malawi and have the power to enter into and perform obligations under this Acknowledgement, and such obligations constitute valid and binding obligations, enforceable in accordance with their terms” The paragraph which the claimant seeks to rely on in this instance is the last one. According to the claimant that last paragraph clearly states that the “acknowledgment is valid and binding and therefore the 3" defendant cannot run away from their obligation under the letter”. The question however is what was the 3“ defendant’s obligation? A reading of the above letter clearly shows that the main purpose of it was to acknowledge receipt of the Notice of assignments. Then the letter goes on to inform that there are no any other third party interests. Then the letter goes on to express willingness to accept the claimant’s instructions and goes on to add that they had received invoices and that the 3% defendant was make payments according to the claimant’s instructions. The last paragraph, in my considered view, simply outlines the 3° defendant’s capacity to enter into agreements and does not in any way express an intention to enter into a legal relationship. This fact is even confirmed in paragraph 9 of the sworn statement of Khumbizeni Dossi which states that the instructions to the 3" defendant were made on the 11" of November, 2014 but that the defendant opted not to act on them or respond to them. It was also the evidence of Khumbizeni Dossi that following the commencement of the legal proceedings there was another meeting held on the 14" of February, 2018, but the 3" defendant still did not act on the instructions or respond to the letter. In terms of the basic principles of contract law, there must be an offer and acceptance. Then there is also of course the principle of privity of contract. In the context of this matter, the 3° defendant was clearly not privy to the assignment contracts and unless there was a clear intention by the 3" defendant to be subjected to those contracts, the 3° defendant is not bound by the assignment contracts. Granted the 3% defendant did use the word “shall” which has been construed to be obligatory. However, what should be noted that the letter is just a proclamation and does not have the force or effect of law. There still was a need for the 3° defendant to accept the claimant’s instructions, which apparently the 3° defendant never did, on two occasions! he 3° defendant be held liable for not ace ecung the instructions? I seriously doubt iat art would be held tiabie for not taking the claimaut’s instructions. This is more sc the 3° detend a wse the primary obligation to honour the assignment contract still remains with the 1 and 2° defendants. f& is the 1° and 2" defendant who pocketed the money and thus breaching their agreements. These it must be stated included the loan agreements and the assignment contracis. beca One would then wonder as to why the claimant would take all these years pursuing the 3" defendant instead of going where the loss lies! This is more so considering that the 3" defendant never guaranteed the loans and thus cannot be asked to indemnify the claimant. Asking the Cl defendant to be liable for the loans of the 1" and 2™ defendant, would be giving the latter an unjustifiable “windfall”. This would definitely be an absurdity! Finally, | must state that I did not see the purpose of the claimant suing the 3% defendant when its money lies with the 1* and 2™ defendants. This is a case of contract and not contributory negligence for the 3" defendant to be asked to pay for the outstanding loans. The claimant has acknowledged that the 3“ defendant was not privy to the assignment contracts. Further the 1" and 9» defendants are clearly not agents of the 3% defendant for the claimant to claim that they are entitled to go after the “deep pocket”. Quite frankly I do not see any cause of action against the 3" defendant and on this note I must dismiss the action(s) against the 3% defendant for being frivolous and vexatious. What I can see here is really a situation of laissez faire by the claimant which clearly wants to sit on its right by inexplicably not going after its money. For a bank, the claimant’s actions are quite careless! In view of this, the action(s) are dismissed with costs to the 3" defendant. a F Made this atthe eee wh siks day 6ficenssamt. YE emmenmnatini eimai 2023 K. T. MANDA JUDGE