Kapyola v Twenty Third Century Systems (Civil Cause 141 of 2022) [2024] MWHC 36 (22 July 2024)

REPUBLIC OF MALAWI IN THE HIGH COURT OF MALAWI CIVIL DIVISION PRINCIPAL REGISTRY CIVIL CASE NO. 141 OF 2022 BETWEEN: JACQUELINE KAPYOLA (ON BEHALF OF THE DECEASED ESTATE OF GILFORDRABOWA KAPYOLA. .... cece cccee eee eseneneeeeeeees CLAIMANT -AND- TWENTY THIRD CENTURY SYSTEMS... cccccseseessserseeenees DEFENDANT Before Honourable Jack N’riva, Judge Mr Newata for the claimant Ms Nkangala, Court Clerk RULING This is a referral from the Registrar of the Court for the Court to decide whether the amount of K317, 000, 000.00 on which a default judgment was entered is subject to tax. The other issue is whether collection fees are payable on the amount. The record has a sworn statement of Cleopas Manyika in support of the application for an order to set aside default judgment. The statement sought to show that the deceased was receiving the amount of K8, 500, 000.00 as gross subject to the deduction of pay as you earn (P. A. Y. E) tax. From the record the said Cleopas Manyika was cross-examined. From the cross-examination, the amount of K381, 976, 064.00, which the defendant communicated as owing the claimant in post-employment benefits was made up of 12 months’ salary in lieu of state pension. The salary was the K8, 500, 000.00 which the defendant argued was gross, and not net. Out of this amount, the sum of K317, 000, 000.00 is what is remaining, which the defendant argues is subject to tax. However, a salary reconciliation sheet that Cleopas Manyika himself attached to his sworn statement shows the sum of K8, 500, 000.00 as the monthly payments made to the deceased as take-home salary. Again, he confirmed that the payment transaction reports generated by the online payment systems, also exhibited, showed the consistent monthly payment of the sum of K8, 500, 000.00 as net salary. He was taken through all the transaction reports attached and the transaction details under which it was recorded that the amounts paid monthly to the claimant after the deceased had departed were monthly salaries (K8, 500, 000.00) aimed at paying out the post-employment benefits that had accrued and the defendant had undertaken to be paying gradually. This, therefore, means that the amount of K8, 500, 000.00 was net, and not gross. In that event, subjecting the amount to tax will only lead to double taxation. Further, we must emphasise that the default judgment is on terminal benefits. As counsel for the claimant argued, taxes were already levied on the amounts in issue. Even assuming that that they were not already taxed, the law abhors ordering the taxation on terminal benefits judgment. See George Namandwa v National Bank of Malawi Limited, Commercial Case No. 294 of 2016 where the Court said the taxman did not intend for judgment debts in actions whose subject matter are claims for terminal benefits to suffer tax deductions. With respect to collection costs on the interest, counsel argued that perhaps the starting point should be that our research has not shown any case authorities where interest was not treated as a debt, in fact the Defendant has not produced any because there is none, .. On the other hand, table 6 under the First Schedule of the Legal Practitioners (Scale and Minimum Charges) Rules talks about “Amount collected” and “Collection of monies”. Simply understood, interest is not something strange, and it does not exist separately from a principal amount. If anything, it simply accounts for the loss in value of the principal amount. That is why interest is awarded. As such, it does not even make sense to say that collection costs can be awarded in respect of one, and not the other where it has accrued. These should be treated in the same manner, collected amounts in the purview of the applicable rules, The case of Grand Prix Motors vs YouthNet and Counselling, Commercial case No. 13 of 2018 also shows that collection costs are awarded on interest. I have read and reread Grand Prix Motors v YouthNet and Counselling. 1 fail to appreciate that the decision tackles the issue of interest. I have also read other decisions on the subject. The issue of interest on collection costs is at large. First, the Registrar did not refer to the Court the question of payment of interest on legal collection costs. Secondly, it is not coming out clearly the basis on which the Court should order interest on the collection costs. Considering the principles on which Courts order payment of interest I am not persuaded to order payment of interest on the collection costs.! Since there is no issue with the payment of the collection costs, I allow the payment of collection cost. I dismiss the payment of interest thereon. In essence, the Court orders that there shall be no taxation on the default judgment sum. The Court orders the defendant to pay the judgment sum within seven days of this order. Collection costs shall be payable with no interest. The Registrar may proceed to assess the collection costs. Costs for the application before the Registrar and this determination are awarded to the claimant. DATED this 22"¢ day of July 2024 J N’RIVA JUDGE See Kankinvangwa and others v Liquidator Import and Export (Mv) Lid [2005] MLR 151 (SCA), Gwembere v Malawi Ratheays Ltd [1978 -80] MLR 369, Lenner Exports (Pry) Lid v City Motors Ltd [1998) MLR 153), Eimstein Construction Company LTD y Mota Engil Engenharia & Construcae SA Commercial Case No. 269 of 2015