Harawa and Another v Airtel Malawi (Commercial Cause 7 of 2023) [2023] MWHC 109 (29 December 2023)

IN THE HIGH COURT OF MALAWI COMMERCIAL DIVISION BLANTYRE REGISTRY Commercial Cause No. 7 of 2023 BETWEEN FRANK HARAWA....cccccecccsccccccscueecsueeeseueeecuecsctsesecteeaeusscensesesees 18ST PETITIONER CHANDRAKANT MAKADIA. 0... cccccccccceeeccenecceeeccunsecussecucsanaass 2NP PETITIONER AND AIRTEL MALAWI PLCs carvers poser sccennuaieasscnyertevecennscnstacenteravge 15* RESPONDENT ALEK PNT SIME cs nsicciuey tres creeds casts oapranacenenesennnaanstiesaacnevcerruen 2NP RESPONDENT CHARLES MUSTAFA KAMOTO\Q 00... ccccccecceseeeeeneeseseneeseeteeeeeess 38 RESPONDENT OBB I INA coe me cya eee gine emotes ns 3 dan Ga p4 vem woe tot 4™ RESPONDENT AI EG cx ee eaey Spee eat wt el Serene antares nmrat atom 5TH RESPONDENT NEELESH PRATAP SINGH srciacascececsssesscstsntyeeseescovensserevicrtosey 6™ RESPONDENT KAYIST M’BWANA SADALA......ccccecseescccceeenueeseceseesseeceesen eens 7™ RESPONDENT Coram: Manda, J Mhango and Kumwenda for the Petitioners Mhone, Njobvu and Misanjo for the 1 to 7" Respondents M, Kachimanga Court Clerk/Interpreter RULING This is the Court’s ruling following the hearing of the two applications by the respondents namely, application for security for costs and application to strike out the within petition. Initially there were ten (10) Respondents to the petition. There was the Malawi Communications Regulatory Authority (MACRA) as the 8 Respondent, the Malawi Stock Exchange as the 9° Respondent and the Registrar of Financial Institutions as the 10" Respondent. However, petitioners and the Respondents executed consent orders removing these respondents from the proceedings. The background to the matter is that the petitioners are shareholders of Airtel Malawi Plc, the iS! Respondent. The 2"! to 7" Respondents are directors of the 1%* Respondent. The Petitioners filed this petition under sections 341, 342, 343 of the Companies Act as read with Rule 4 of the Companies (Shareholder Actions) Rules 2017. They allege a number of violations of legal and fiduciary obligations on the part of the 1° Respondent and the directors in relation to the Respondent’s listing as well as trading on the stock market. in summary the grounds of the petition are that on or about 20 December 2019, the 1* Respondent published a Prospectus under section 29 of the Securities Act for purposes of listing and trading on the stock exchange. The petitioners allege that when the 1‘** Respondent was registering the prospectus for purposes of listing on the Stock Exchange, there was a pending litigation involving the Airtel Malawi Limited in the case of Airtel Malawi Lid v Malawi Revenue Authority (MRA) MSCA Civil Appeal No.61 of 2016, “the pending litigation,” in which, the petitioners so argue, Airtel Malawi Pic could potentially be liable to Malawi Revenue Authority in the sums of K5,700,000,000. The petitioners allege that in breach of section 260(1)(b) and 2(h) of the Companies Act Cap 46:03 of the Laws of Malawi, Section 28 and 29 of the Securities Act, Cap 46:04 of the Law of Malawi, Section 18 and 28 of the Second Schedule to Securities (Registration requirements for Securities) Directive 2015, and paragraph 4.81 of the Malawi Stock Exchange Listing Requirements (MSELR), Airtel Malawi Ple failed to disclose this pending litigation in the prospectus. They allege that they participated in the Initial Public Offering (IPO) and were prejudiced as the details of the above pending litigation in which the Airtel Malawi Plc could be held liable to pay MRA over <5,000,000,000 was concealed. The Petitioners further contend that Airtel] Malawi Pic deceptively presented profit forecast of K4.880bn to deceive prospective shareholders including the petitioners. They further allege in their petition that the 1‘ Respondent through directors published a NIL contingency liability in the financial statements for the prospectus in order to deceive the prospective shareholders including the petitioners. They are of the view that directors facilitated the non-disclosures hereof, and therefore facilitated the 1‘' Respondent’s breach of the laws and hence directors failed in their duty to adhere to corporate code of governance in breach of section 184 of the Companies Act. The petitioners further allege that the 1°* Respondent has up to date failed to comply with clause 2.34¢d) of the Malawi Stock Exchange Listing Requirements requiring that, within three years of listing on the Malawi Stock Exchange, 25% of each class of its equity shares be offered to and be held by the public. They contend that they are being prejudiced as they have been denied opportunity to participate in the 25% equity share of the 1“ Respondent. The petitioners further contended that the Malawi Stock Exchange is in breach of Sections 3(a)(1i)(iv), (d) and 4(1) of the Schedule to the Securities Act by permitting the 1°* Respondent to be listed on the stock market without complying with sections 260(1)(b) and 2(h) of the Companies Act Cap 46:03 of the Laws of Malawi, Section 7 of Securities (Registration requirements for Securities) Directive 2015, Section 28 and 29 of the Securities Act, Cap 46:04 of the Law of Malawi, Section 18 and 28 of the Second Schedule to Securities (Registration requirements for Securities) Directive 2015, and Paragraph 4.81 of the Malawi Stock Exchange Listing Requirements. They allege that the Malawi Stock Exchange deliberately aided the breach of rules by the 1 Respondent and hence violated section 27 of the Securities Act. Pursuant to rule 4(3) of Shareholder Action Rules, I had scheduled the matter for the return date of 24 July 2023, to give directions for the conduct of the proceedings. On or about 19 July 2023 the Respondents filed the present application for security for costs and application to strike out the petition. The 8", 9" and the 10 Respondents had also filed preliminary applications against the petition. Considering that the 8", the 9 and 10 respondents are no longer parties to this petition, it has become irrelevant for me to deal with their preliminary applications. Firstly, the application for security for costs proceeded on the allegation that the Petitioners are incapable of paying costs because in the previous case which was dismissed in favour of the Respondents the petitioners failed to pay costs. | must mention that when the application was actually heard on 1* November 2023, the Petitioners had paid the full amount of costs of K.36,757,143 which were ordered in the previous litigation. However, the Respondents maintained their argument that the Petitioners are not people of means. The application to strike out the Petition was based on a number of grounds contained in the sworn statement of Hlupekire Chalamba. As | understand them, I am able to summarize the erounds of application as follows; a) that the Petition is brought under the wrong sections of Companies Act and therefore incompetent, b) that the Petitioners are not shareholders for purposes of shareholder action rules; c) that the Petitioners have not identified loss or prejudice or oppression envisaged under sections 341, 342 and or 343 of the Companies Act, d) that the Petitioners have no locus standi to petition for breach or regulatory requirements; ¢) that the matter is frivolous and vexatious. The Petitioners have strongly opposed both applications through sworn statements of the 2" Petitions. Against the application for security for costs, the Petitioners argue that they are people of means and in the event that the don’t succeeded in their petition they will be able to pay costs. Against the application to strike out the petition, the Petitioners argued that the application by the Respondents is not only improperly brought but it is also devoid of merit. issues for determination The main questions before me are whether the petition is incompetent and I should strike it out and. The other issue is whether the Petitioners are incapable of paying costs and therefore I should order security for costs. I will firstly dispose the application to strike out the petition. This is for the obvious reason that if the petition is truck out, the applications for security for costs will be irrelevant. The law and analysis In opposition to the application, the Petitioners submitted that the application to strike out the petitions, is wrongly made under the wrong sections and Orders of Civil Procedure Rules. It is therefore vital for me to deal with the issue of the competency of the application before me. The application to strike out the Petition was made under sections 337, 338, 339 440, 341, 342 and 343 of the Companies Act, Order | rule 5(5) Order 10(Rule 1 of the Courts High Court Civil Procedures Rules) and Rules 2, 3, 4 of the Companies (Shareholder Actions rules). The Petitioners have challenged the procedure or manner of the application to strike out the petition. The Petitioners submitted that the application to strike out the petition is wrongly taken and also made under the wrong sections of the law or rules. The Petitioner’s argument was that an application by the Respondent should be properly construed as an application to dispose the petition on point of law or end the proceedings early. They relied on the case of Edgar Namakhwa vs Mota Engil Civil Cause Number 355 of 2020 and submitted that the Courts (High Court, Civil Procedure) Rules, 2017 do not provide any forum for disposing case on point of law or indeed ending the petition early. The Petitioners submitted that there is no forum or any provision cited by the Respondents by which the court is empowered to summarily deal with preliminary issues of fact or law. The Petitioners’ view is that the correct Order under which a party may request the court to deal with preliminary issues is Oder 16 rule of Civil Procedures after the parties have settled their pleadings and disclosures. The petitioners contended that the only permissible procedure for dealing with a petition under Shareholder Action Rules is the Shareholder Action Rules. They therefore contended that the application by the Respondents which seeks to dispose the petition summarily on point of law is wrong and also premature because presently the issues have not yet been settled the respondent having not yet filed their defenses to the petition. In response to the Petitioner’s argument hereof, Counsel for the Respondents filed supplementary sworn statement and contended that the application is competently made under Order 10 rule | under which the court is empowered to issue directions. Hence, counsel contended that the application should be construed as an application seeking directions under Order 10 rule 1 of CPRs. In addition, counsel for the Respondents contended that the court has inherent jurisdiction to deal with any kind applications in proceedings including application to strike out petition herein. Counsel cited a number of case authorities including Phiri vs Phiri Matrimonial Cause Number 45 of 2015 and Roman Longwa V/a Kaizwanga Investment and General Dealers Commercial Case number 32 of 2022 to support the view that the court has inherent jurisdiction even if a proper law is not cited. In reply, Counsel for the Petitioners argued that the Respondents cannot say that the application before the court is an application for directions because when the matter was initially called for directions on 24 July 2023, counsel for the Respondents opposed the idea that any directions could be given in the proceeding at that stage. During the hearing on 24 July 2023, counsel for the Petitioners had proposed that the court could proceed to issue some directions pending the determination of the Respondent’s applications. However, it is on record that counsel for the Respondents protested against giving any directions at this stage until the application to strike out the petition is heard. Counsel for the Respondent stated that the court could not issue any directions before the application to set strike out the Petition is heard or determined. | therefore find the argument that the application before me is an application for directions somehow inconsistent. | agree with the Petitioners that the application by the respondent is indeed an application to deal with the petition summarily on point of law. As correctly argued by the Petitioners, Order 10 of the CPR generally deals with applications for interlocutory orders in proceedings. An application to seek directions of the court would indeed qualify as interlocutory application. By its very nature an “interlocutory order” is an “interim” order not intending to end the proceedings. The Black’s Law Dictionary, 2nd Edition meaning of interlocutory order is “4 judgment or decision that is made while a case is still ongoing”. My view is that Order 10 rule 1 of CPRs provides a form for making an application in proceedings for and interlocutory order of directions but does not provide forum for the ending the proceedings early. I don’t find an application of this nature to correctly fit in the description of an application for interlocutory order or directions under Order 10. I find that the application is an application to end the petition summarily on point of law. Such application cannot be properly taken under Order 10 of CPRs. | thus concur with Honorable Justice Tembo’s finding in the case of Edgar Namakhwa vs Mota Engil Civil Cause Number 355 of 2620 unreported where he said; “This Court also agrees with the claimant that the Courts (High Court) (Civil Procedure) Rules do not provide for disposal of a case on a point of law as was the case under the old Rules but rather for summary judgment applications. The defendant could therefore not properly make the present application to have the matter herein determined on a point of law. It is important that the bar and the bench must appreciate that such procedures as were provided under the old Rules of procedure and which are not included in the current Rules of procedure must not be resuscitated through the back door as is sought herein. There is clearly no provision for making an application for disposal of case of point of law under ‘Courts (High Courts, Civil Procedure Rules 2017....” [emphasis added] As correctly pointed out by the Petitioners, ending proceedings early is provided under Order 12 of the Civil Procedure Rules by either summary judgment or judgment on admission or want of prosecution as the case may be. The application herein is not made under any rule of Order 12 of Civil Procedure Rules. The Respondents argued in the alternative that even if none of sections or rules cited as basis of the application are correct, the court should use its inherent jurisdiction to hear the application. The Petitioners’ counter argument was that if a party wants to rely on inherent jurisdiction the same must be stated in the application as the basis of the application so that the other party is duly warned about reliance on the inherent jurisdiction. They stated that this was not done in this application such that the application is as good as take under no rule at all. | agree with the Petitioners that the position of the law is that application must cite a rule which provides the court with such jurisdiction. The case of George Kainja vs Director of Anti- Corruption Bureau and other Judicial Review Cause Number 48 of 2022 supports this view. The court made the following observation regarding the use of inherent jurisdiction “Secondly, Counsel Saidi’s attempt to base the Application for Stay on inherent jurisdiction is bound to fail. The doctrine of inherent jurisdiction helps the Court to achieve Justice where it would not have been possible to do so: See Grobbelaar v. News Group News Papers Ltd [2002] WLR 3024 wherein the House of Lords adopted the definition by Jacob in his article “The Inherent Jurisdiction of the Court (1970) 23 CLP 23” which state as jollows: “The inherent jurisdiction of the court may be defined as being the reserve or fund of power, residual source of powers, which the court may draw upon as necessary whenever it is just and equitable to do so and in particular to ensure the observance of the due process of law, to prevent improper vexation or oppression, to do justice between the parties and to secure a fair trial between them.” Another way of putting it is that inherent jurisdiction authority remains the means by which Courts deal with circumstances not proscribed or specifically addressed by rule or statute, but which must be addressed to promote the just, speedy, and inexpensive determination of every action. Inherent jurisdiction has to be exercised in conformity with statutes and wellestablished rules of practice: see the Canadian case of College Housing Co- 6 operative Lid. v. Baxter Student Housing Ltd. [1976] 2 S. C. R. 475 where the Supreme Court of Canada observed thus: “Inherent jurisdiction cannot, of course, be exercised so as to conflict with statute or rule. Moreover, because it is a special and extraordinary power, it should be exercised only sparingly and in a clear case.” Three principles emerge from the foregoing, namely, the so-called inherent Jurisdiction (a) is equitable in nature, (b) is solely intended to ensure justice, and (c) has to be exercised with restraint and discretion. This means that a prayer based on the Court’s inherent power cannot be granted as a matter of right. In short, it is not enough for a party seeking to invoke the Court’s inherent jurisdiction to simply state that he or she will call in aid the principle of the Court's inherent jurisdiction. He or she is required to establish why resort to this principle is necessary in the case before the Court. In the present case, Counsel Saidi did not explain why the Ist Defendant sought to rely on the principle of inherent jurisdiction in making the Application Jor Stay when Order 28, rule 48, of the CPR contains express provisions regarding suspension of enforcement of an order. In the circumstances, the invocation by the I st Defendant of the inherent jurisdiction of the court is clearly misplaced. I am fortified in my view by the decision of the Supreme Court of Appeal in The Registered Trustees of Youth and Society v. Greizeder Jeffrey and others MSCA Civil Appeal No. 70 of 2018. The Supreme Court of Appeal held that reliance on a Court's inherent jurisdiction is inappropriate where one has identified statutory provisions under which the application can be grounded or indeed where there is a statutorv provision under which the application can be brought’ As stated in George Kainja inherent jurisdiction will only be invoked if no rule under which an application can be made is provided. In my view the whole Order 12 of the CPR provides various mechanisms in which a party desiring to end proceedings early may apply. The argument that | should invoke inherent jurisdiction while Civil Procedure rules has other mechanisms by which the Respondents could have applied to dispose the matter early is declined as it has no merit. My finding has support of the case of Malawi Law Society vs Registered of Financial Institutions and Insurance Association of Malawi MSCA, Civil Appeal Number 9 of 2021, in which the Supreme Court discussed the application of inherent jurisdiction in following manner; ‘In the South African case Oosthuizen vy Road Accident Fund 2011 (6) SA 31 (SCA) in discussing the inherent Jurisdiction of the court, it was stated as follows: [13] Our courts derive their power from the Constitution and the statutes that regulate them. Historically the supreme court (now the high court), in addition to the powers it enjoyed in terms of statute, has always had additional powers to regulate its own process in the interests of justice. This was described as an exercise of its inherent jurisdiction. That power is now enshrined in s 173 of the Constitution... [14] Jerold Taitz succinctly describes the inherent jurisdiction of the high court as follows in his book The erent Jurisdiction of the Supreme Court (1985) pp 8-9: *... This latter jurisdiction should be seen as those (unwritten) powers, ancillary to its common law and statutory powers, without which the court would be unable to act in accordance with justice and good reason. The inherent powers of the court are quite separate and distinct from its common law and its statutory powers, eg in the exercise of its inherent jurisdiction the Court may regulate its own procedure independently of the Rules of Court.’ Il [17] A court’s inherent power to regulate its own process is not unlimited. it does not extend to the assumption of jurisdiction which it does not otherwise have. In this regard see National Union of Metal Workers of South Africa & others v Fry’s Metal (Pty) Ltd where this Court stated that: “While it is true that this Court’s inherent power to protect and regulate its own process is not unlimited — it does not, for instance, “extend to the assumption of jurisdiction not conferred upon it by Statute”. .” [18] ... Moreover, a high court may only act in respect of matters over which it already has jurisdiction. A high court can therefore not stray beyond the compass of s 173 by assuming powers it does not have. [19] Courts have exercised their inherent jurisdiction when justice required them to do so. In this regard the following dictum by Botha J in Moulded Components and Rotomoulding South Africa (Pty) Lid v Coucourakis & another should be noted. . ‘T would sound a word of caution generally in regard to the exercise of the Court’s inherent power to regulate procedure. Obviously, I think, such inherent power will not be exercised as a matter of course. The Rules are there to regulate the practice and procedure of the Court in general terms and strong grounds would have to be advanced, in my view, to persuade the Court to act outside the powers provided for specifically in the Rules. Its inherent power, in other words, is something that will be exercised sparingly. As has been said in the cases quoted earlier, I think that the Court will exercise an inherent Jurisdiction whenever justice requires that it should do so. I shall not attempt a definition of the concept of justice in this context. I shall simply say that, as I see the position, the Court will only come to the assistance of an applicant outside the provisions of the Rules when the Court can be satisfied that justice cannot be properly done unless relief is granted to the applicant.’” “(This Court (Chipeta SC, JA) in Parliamentary Service Commission v SIR Catering Services [2018] MLR 198 proceeded likewise after being called upon to apply the 12 default provisions of the Civil Procedure Rules 1998 of England ostensibly to fill in gaps apparent in local legislation. He stated (p 220 par /): “As for issues promoting the overriding objective of the court, as provided in the Civil Procedure Rules 1998, these to me, should not be taking priority over what local legislation says ... It is local law that should instead take priority, and only when it has fallen short of making provision for a situation should resort be had to the default provisions contained in the Civil Procedure Rules 1998 to fill gaps in local law.” He further stated (p 221, par e) that the jurisdiction of the Court should not be called upon just to serve the convenience of a party but to serve the interests of justice. The specific words he used are: “Now, I tend to think that when the jurisdiction of this court is being called upon just to serve the convenience of a party, and not necessarily to serve the interests of justice, this court should, on the spot, put its foot down and say rules are rules and they must be obeyed.” “.. That a court cannot exercise jurisdiction not conferred upon it by statute is exemplified by another South African case, Mochy Nedtravel (Pty) Ltd. tla American Express Travel Service (329/95) [1996] ZASCA 2; 1996 (3) SA I (SCA) in which the court was urged to use its inherent power to grant a party a right of appeal which the statute, the Insolvency Act, did not give to it. In response to this submission the court observed that its inherent power did not extend to the assumption of Jurisdiction it otherwise did not have under the Act.” As observed earlier, one of the grounds of the Respondent’s application to strike out the petition was that Petition substantially failed to cite the correct provisions. My view is that the Respondents themselves have not cited the correct law that gives this court jurisdiction to dispose petition summarily. Since inherent jurisdiction is equitable in nature, those who desire to use it must come with cleans hands. See Rombani Longwa t/a Kaizwanga Investment and General Dealers, Cornmercial Case number 32 of 2022. My view therefore is that respondents have come to equity with unclean hands. I will therefore not use my discretion to invoke inherent jurisdiction. I find that the application to strike out petition is incompetently taken out. If the issue of competence of the application was heard as preliminary issue to the application, I should have proceeded to dismiss the application at this stage without making any comments on the merit, However, I will not do so because during the hearing the parties proceeded to address me on the entire application and including the merits of the application. ] am therefore compelled to deal with the merits of the application. The Respondents argument for the application was that the reliefs the petitioners are seeking cannot be sought by the petitioners under sections 341, 342, 343, and or alternatively that the petition has not particularized any breaches under sections 150, 187 or 342 of the Companies Act. The Respondents also argued that the Petitioners are not shareholders for purposes of shareholder actions rules because the petitioners only became shareholders of the Airtel Malawi PLC after the alleged breach had already occurred. They went on to argue that if anything the claims by the petitioners lie in contract rather than through a shareholder’s action. They cited the case of Derry vs Peek (1889) UKHLI to buttress their argument that the issues of misrepresentation in the prospectus lie in contract and not in a shareholder action. The Respondents went on to argue that the petitioners have not particularize any prejudice or oppression under sections 341 or 343 warranting the Petitioners as shareholders to seek redress under or through a petition taken under Shareholder Actions rules. It was further contended that the petitioners have not particularized any duties they seek to protect or enforce under sections 342, which the Respondent argued, must be read together with section 341. In the view of the Respondents the Petitioners who only became shareholders after or upon listing cannot enforce any breach which occurred during pre-listing. The Respondents further submitted that the Petitioners have not sought any leave of the court to maintain the petition which, in the Respondent’s view must be deemed to be a derivative action. The Respondents further submitted that the Petitioners have not identified any prejudice or oppression occasioned to them to enable them act against the company envisaged under Division fH Part X1V of the Companies Act. The Respondents also argued generally that the Petitioners do not have locus standing to sue for alleged breaches of regulatory requirements. The Respondents went on to submit that the petitioners are generally frivolous litigants because, in the respondent’s view, the Petitioners have sued several companies in which the petitioners have shares. In response the Petitioners contended they are competent persons to petition the court for breach of laws by the company under Division II Part XIV of the Companies Act because the action is not derivative action. They contended that under Division II Part XIV of the Companies Act derivative actions have been distinguished from personal actions by shareholders. They contended that the manner sections 341, 342 and 343 are couched, clearly expands the categories of people who can petition the court for breaches committed by the company. They particularly pointed the inclusion of the phrase “any other entitled person” in section 343 of the Companies Act, to mean that any other person who feels that the company has committed breach of the law can take up action against the company. In addition, the Petitioners contended that the duties envisaged under section 342 of the Companies Act are not exhaustive and not restricted to duties in sections 176 to 180 or 150 and 157 of the Companies Act. In this regard the Petitioners argued that section 342 of the Companies Act does not list any particular duties envisaged therein other than state that a share-holder may bring action for breach of duty owed to a shareholder by company. They therefore submitted that section 342 of the Companies is couched in manner that it protects any other duty imposed on the company to shareholders including duties to disclose litigation and duties not to provide misleading statement under section 260 of the Companies Act, section 46 of the Securities Act. It was therefore submitted that the petitioners are entitled to petition the court to demand compliance with duties imposed on the Company including mandatory duty of disclosure duty under section 260 and duty to comply with local shareholding requirements. With regard to the issue of locus standi, the Petitioners argued that locus standi is conferred on them by virtue of being shareholders under sections 341, 342, and 343 as read with rule 4 of the Shareholder Actions Rules. They contended that there are two types of shareholder actions or proceedings under Division II of Part VIX of the Companies Act, 2013 namely derivative actions and personal actions and that sections 332, 342 and 343 permit the personal actions. The petitioners submitted that the rule in Foss vs Harbottile does not apply to the present petition. They cited the South African case of Larrett vy Coega Development Corporation (Pty) Lid 2015 6 SA 16 (OKG) in which the difference between derivative action and personal action was recognized in light of the common law restriction of Fess vs Harbottle. The Petitioners submitted that in this case it was recognized that derivative and personal action must be distinguished from each other based on the cause of action and the remedies available in terms of each of the actions. The argued that while a wrong committed against a company may directly infringe on the legal rights of a company, it may also indirectly prejudice the interest of the shareholders hence shareholder can take out action directly against the company. | agree with the petitioners that a petition taken under section 341, 342 and 343 is different from derivative action. In my view the Companies (Shareholder Actions Rules) clearly distinguish derivative actions from other petitions. Rule 4 of the Shareholder Actions leaves this in no doubt where it stipulates that no leave is required in all other shareholder action other than derivative actions. In my view the petitioners having established that they are shareholders of the 1 Respondent, they are entitled to petition the court as shareholders. They do have sufficient interest in the affairs of the company and consequently I find that they are entitled persons envisaged under section 343 of the Companies Act to file the petition the court against the Respondents. I also disagree with the Respondents argument that the petitioners only became shareholders after the company was already listed on the stock market. Ideally, the Respondents are attempting to mutually exclude the act of listing on the stoke market from the act of becoming a shareholder of a listed company. In my considered view, these two processes should not be separated. I am of the view that that the process of listing on the stock market ends once a company has secured sufficient threshold of subscribers or participants to the IPO. lt not conclusive that the petitioner became shareholder after listing already happened. Consequently, the issue that the Petitioners only became shareholders of the 1 Respondent after the 1*' Respondent was already listed on the stock market is, in my considered view, an issue that requires a hearing. The Respondents also advanced an argument that the Petitioners allegations related to breach of local shareholding requirements provided under Section 2.34(d) of the Malawi Stock Exchange Listing Requirements, is a regulatory issue and does not concern the Petitioners. In my view this argument does not hold because the Petitioners did join the concerned regulators to this action in their own respective capacities. | cannot fault the Petitioners for adding the regulators to the action. Without necessarily commenting on the merit of the allegations, my considered view is that trading.in stock markets is subject to strict regulatory framework. In our case Securities Act,2010 has put in place various requirements that the stock exchange operators and those operating and trading equities on the stock exchange must comply with. This is for obvious purposes of protecting members of the public and traders on the stock exchange from fraudulent and manipulative acts and practices. It is therefore expected that the regulators should be on top of their game as far as regulating Companies on stock exchange is concern. Hence, a complaint like the present one, that the regulator may have not only failed to regulate its member but has also actually aided the member in the commission of the alleged breach of law, deserves a full interrogation, With regard to issues of whether the petition is frivolous or vexatious, the Respondents argument was grounded of the alleged fact that the Petitioners have previous sued companies in which they hold shares. | do not find this argument to have any merit. As submitted by the Petitioners, the words frivolous and vexatious are meant for cases that are obviously unsustainable. For an action to be frivolous, the pleadings must be obviously frivolous or obviously unsustainable. Each case is considered on its on circumstances. See the case of Mirza General Traders vs AMI(Mw) Ltd Civil Cause Number 59 of 1999, unreported. Further, in the case of Christie v. Christie (1873) LR 8 Ch Ap 499 at 503 it was as stated follows: - "The sole question is whether the matter alleged to be scandalous would be admissible in evidence to show the truth of any allegation in the pleading which is material with reference to the relief prayed” See Lindley L. J. in Att. Gen. Of Duchy of Lancaster v L & N. W Ry [1892] 3 Ch 274 at 277. In my view the mere fact that the petitioners sued other companies is not ground to conclude that the present petition is frivolous or vexatious. The petitioner submitted that no previous case has ever been held to be frivolous. They submitted that a previous matter against the respondents herein, Harawa and Makadia vs Airtel Malawi PLC, Case Number 83 of 2021, was dismissed on technicality. They also argued that the court in that case actually permitted the petitioner to recommence their action a petition which they have done. Thus, they submitted that the respondents should be precluded from arguing that the petitioners are frivolous litigants citing which was dismissed on the of wrong commencement. In my finding the petitioner have raised sufficient ground to be tried by the court. The argument that the petition is frivolous or vexatious is not sustained. I fail to see any substance in the argument that the petition is frivolous or vexatious. The fact that the petitioners sued other companies, does not in itself, show that the current petition does not have merit. The Respondents have not demonstrated that any of the cases previously taken by the Petitioners were dismissed for being frivolous of vexatious. Therefore, | dismiss the argument that the petition is frivolous or vexatious. Having reached this far | have disposed the application to strike out the petition. I now turn to the application for security for costs. In support of the application for security for costs, the Respondents counsel contended that the Petitioners have no means to pay costs if they were to lose the proceedings. They also stated that the Petitioners have failed to pay costs ordered in the previous case of Harawa and Makadia vs Airtel Malawi PLC, Case Number 83 of 2021. In oral submission, during the hearing, counsel for the Respondents submitted that the Petitioners only paid the costs for the previous litigation through third party debt orders and upon obtaining a charging order. In response, the Petitioners submitted and tendered supplementary witness statement with evidence to prove that they had fully paid the costs in sum of K36, 757,153 which were ordered in the previous case. They also alleged that the application for security for costs was made in bad faith aimed at frustrating the action. They supported this argument by stating that the Respondents had at some point rejected cash payment of K 10,000,000 but proceeded to file the present application claiming that the Petitioners were failing to pay costs. They finally submitted that they are people of means and capable of paying costs. They also argued that their petition has merits and reasonable prospects of success. The therefore prayed for dismissal of the application for security for costs. in determining whether or not to grant and order for security for costs, I have to use my discretion. In the case of Steering Timber International vs Malawi Savings Bank and FDH Bank Commercial Case Number 30 of 2017 this court refused to exercise its discretion to order for cost and in its order the court highlighted the basic principles applicable when dealing with application for security for as laid down in the English case of Keary Development Lloyd vs Tarmac Construction Limited and another, 1995) 3 All E. R 53. The following key principles came out clearly, namely; a) The possibility or probability that the plaintiff company will be deterred from pursuing its claim by an order for security cost (Okotcha vs Voest Alpine Intertrading GmbH [1993] BCLC 474 at 479 per Bingham LJ, with whom Steyn LJ agreed). b) The court must carry out a balancing exercise. On the one hand it must weigh the injustice to the plaintiff if prevented from pursuing a proper claim by an order for security. Against that, it must weigh the injustice to the defendant if no security is ordered and at the trial the plaintiffs claim fails and the defendant finds himself unable to recover from the plaintiff the costs which have been incurred by him in his defence of the claim. The court will properly be concerned not to allow the power to order security to be used as an instrument of oppression, such as by stifling a genuine claim by an indigent company against a more prosperous company, particularly when the failure to meet that claim might in itself have been a material cause of the plaintiff's impecuniosity. c) In considering all the circumstances, the court will have regard to the plaintiff company’s prospects of success. But it should not go into the merits in detail unless it can clearly be demonstrated that there is a high degree of probability of success or failure (see Porzelack KG v Porzelack (UK) Ltd [1987] 1 All ER 1074 at 1077, per Browne-Wilkinson V-C). In this context it is relevant to take account of the conduct of the litigation thus far, including any open offer or payment into court, indicative as it may be of the plaintiffs prospects of success. But the court will also be aware of the possibility that an offer or payment may be made in acknowledgment not so much of the prospects of success but of the nuisance value of a claim. in my view the petitioners have demonstrated their ability to pay costs by paying the sum of K 36,757, 143. I do not think there could be more evidence of capability than this. The petitioners have clearly demonstrated their capability to pay costs. I do not find the argument that the payment was only secured through enforcement helpful. My view is that enforcement rules do actually serve useful purpose of helping judgment creditors secure payments. The fact that payment has been obtained thought enforcement is not evidence that judgment debtor is incapable of paying. Therefore, considering all the circumstances of this case and the evidence before me, I decline to order security for costs. | therefore dismiss the application for security for costs, Conclusion In conclusion | find that the Respondent’s application to strike petition is incompetently brought under the incorrect provisions. I also find that the Respondents application to strike out the petition lacks merits. I find that the petitioners having acquired shares in the 1“ Respondent, they have sufficient interest in the 1°' Respondents and sections 341, 342 and 343 give them wide latitude to present a petition against the Respondents. In this regard I have not found any merit in the argument that the petitioners only became shareholders after the breaches complained were already committed. I further dismiss the argument that the present petition is frivolous. I have not found any convincing reason for this argument. | accordingly dismiss the application to strike out the petition. On the application for security for costs | decline to use my discretion to make an order for security for costs. | have found that the petitioners are people of means and capable of paying costs in the event that they are not successful in their petition. Without necessarily considering the merits, my view is that petition does not qualify to be described as hopeless endeavor for me to grant the respondents an order for security for costs. I therefore dismiss the application for security for costs. Directions Having disposed of the preliminary applications the matter is now proceeding to directions. The matter will therefore be set down for directions. In the meantime, I make the following preliminary directions pending the next return date. Firstly, the petitioners should proceed to file notice of adjournment for return date under rule 4(3) of the Shareholder Actions rules. Secondly, I direct the Respondents to file their points of responses to in opposition to the petition, if they so wish, within 14 days of this ruling. The matter will thereafter be set down for the return date. Costs Costs are in the discretion of the court. In most cases, costs follow the event. In this case therefore, I will award costs to the Petitioners for both applications. The petitioners prayed that costs should assessed immediately. Under Order 31 rule 3(1) (c) of CPR, the court has discretion as to when costs are to be paid. I therefore use my discretion to allow the petitioners prayer that costs for both applications be assessed if the quantum is not agreed by parties within 14 days of this ruling. Made in Chambers this ...29* .... day Off......cscscscssesceces December... ....csccecsvees 2023 i a : - \ Z we Lon . ern Z _ : i m IT. MANDA RE JUDGE