NBS Bank PLC v NICO General Insurance Company Limited (Commercial Cause 362 of 2018) [2020] MWCommC 1 (30 November 2020)

IN THE HIGH COURT OF MALAWI COMMERCIAL DIVISION LILONGWE REGISTRY Commercial Cause No. 362 of 2018 BETWEEN NBS BANK PLC... oo. eect ee ene enna er sernertesrisereeetecneereere eo LAIMANT AND NICO GENERAL INSURANCE COMPANY LIMITED............ DEFENDANT Coram: HON. JUSTICE K. T MANDA Matenje, SC, Chapo, Kaonga, Roka for the Claimant Latif, SC, Chalamanda for the Defendant M. Nanga Court Clerk/Interpreter RULING This was the defendant’s application requesting this court to stay these proceedings on account that there are concurrent criminal proceedings under Criminal Case Number 1 of 2019 before Justice Nyakaunda Kamanga at the High Court, Principal Registry. The application is opposed. Background The claimant in this instance is a commercial bank and the defendant is an insurance company. Under a policy of insurance taken out by the claimant between the 1° of August, 2013 and 31* July, 2014, the defendant agreed to indemnify the claimant in respect of direct financial loss which the claimant would sustain as a result of and solely and directly caused by dishonest and fraudulent acts of any employee, wherever committed and whether committed alone or in collusion with others. In or around November, 2016, the claimant’s senior management was apparently alerted of a possible case of fraud at its Limbe Service Centre, which fraud went as far back of 2013. Following, this the claimant instituted and audit which in or around January, 2017 apparently concluded that the claimant had suffered financial loss caused by fraud/dishonesty of some of its employees. According to the claimant, the fraud was reported to the defendant and a claim for indemnity was made. That claim for indemnity is now the basis of this action. In the meantime, however, the claimant also reported the matter to the police and the matter is now being prosecuted by the Director of Public Prosecutions before Justice Nyakaunda Kamanga. The Application The basis of the defendant’s application is that the claimant commenced these proceedings when the Director of Public Prosecutions had also commenced criminal proceedings against some of the claimant’s employees namely Goodson Kapalamula, Victor Banda and Edwin Visabwe. According to the defendant they only became aware of this fact after the same was disclosed in sworn statements deponed by one Manfred Sibande and one Harold Phiri, which sworn statements were served on the defendants, Of particular interest to the defendant was the statement that the claimant formally reported the fraud to police and that the three employees are now being prosecuted for the offences of conspiracy to defraud, money laundering, obtaining money by false pretences, passing valueless cheques, fraudulent false accounting and theft by servant. According to the defendant, both this matter and the criminal case against the defendant’s three employees are going to be dealing with the same facts and thus the claimants should not have commenced these proceedings. In this regard the defendant asked the court to exercise its inherent jurisdiction to stay these proceedings until the criminal matter is concluded so as to avoid prejudice and the 2 court finding itself in an anomalous position of where this court would come up with a decision which is contrary to the decision in the Criminal Court. It was the defendant’s argument that the matter before this court centers around the issue of fraud. That the question being whether there was fraud or not and whether or not to grant the claimant’s prayer under the policy of insurance. The defendant also averred that the question before Justice Nyakaunda Kamanga is also about fraud. Further, the defendant also noted that the two cases involve examining the conduct of the ex-employees who are alleged to have committed acts of fraud while in the claimant’s employ. In the opinion of the defendant, they stated that considering the nature of offences the ex-employees are facing, the questions which wiill be asked in the criminal proceedings are the very same questions which this court will also have to ask and make a determination on. On this note the defendant stated that the facts in the two matters are the same and argued that in terms of Chiumia v Southern Bottlers Limited [1990] 3 MLR 114 (HC), the critical question is about the issues being dealt with by the two courts. According to the defendant, there is a need to maintain the integrity and this can only be done by avoiding the situation where 2 courts arrive and 2 different verdicts. In such a situation, the defendant stated that the criminal proceedings should be allowed to take precedence as decided in Bango v Attornery General and Another |2014] MWHC 474. The defendant argued this in the context of the fact that, according to them, the claimant is a party in the criminal proceedings on account that they are a complainant in the criminal case. The defendant thus prayed that these proceedings should be stayed on account that if the ex-employees are acquitted in the criminal case, then the claimant will not be entitled to indemnity. The Opposition The opposition to the application for stay by the claimant was apparently based on the position of the law. the claimant’s argument being that it is not the correct position of the law that where one is not a party in a criminal case, then they cannot institute civil proceedings, till the criminal case is concluded. In this regard, it was noted that in the Chiumia Case, Mr. Chiumia had sued for false imprisonment when at the same time he was also charged with the offence of theft. The claimant thus noted that Mr. Chiumia was both a complainant and an accused person. This the claimant also noted was the situation in the Bange Case. In this regard, the claimant argued that for a party to apply for stay of civil proceedings pending the determination of a criminal matter, they must be both an accused person in a criminal case and a complainant in the civil matter to be stayed which the claimant noted was not the case in this instance. The claimant thus urged this court to consider its decision in Reliance Tranding and Another v The Attorney General Commercial Case No. 16 of 2018, 20th February, 2020. Further, the claimant also argued that when it comes to the question granting a stay, great care must be exercised by the court in exercising its discretion. That the stay can only be granted where there wil! be a real risk of injustice which may lead serious prejudice to the parties and not to the court (counsel cited the case of R v Panel on Takeovers and Mergers ex parte Fayed [1992] BCC 524.) secondly, the claimant also stated that in considering whether to grant a stay or not, the court must also consider the competing interests of the parties as per the decision in Panton y Financial Institutions Services Limited [2003] UKPC 8. In this regard the claimant averred that the parties must parties both in the criminal and in the civil case and in the context of this matter the claimant noted that the defendant was not being charged with any criminal offences and cannot therefore argue that they are going to be prejudiced. Thirdly, in terms of prejudice, the claimant submitted that the defendant has not shown what the prejudice would be and thus have not discharged their burden in that regard. Further, the claimant also noted when it comes to prejudice, the same can only be looked at in terms of self-incrimination which does not apply to NICO. In any case the claimant also noted that self-incrimination concerns tactical advantage and a stay cannot be granted for a tactical advantage and also that NICO cannot claim that they will be incriminated. Further still, the claimant also noted that the defendant in this matter cannot raise the issue of bad publicity which will arise if this case is allowed to proceed since the matter before Justice Nyakaunda Kamanga is not being tried by a jury. The claimant also argued that the defendant cannot claim that they will be financially burdened if the two matters were to be heard concurrently since NICO is not a defendant in the criminal matter. On the basis of the foregoing, the claimant thus asked the court to dismiss the defendant’s application. In this regard, the claimant noted that the decision in Chiumia is no longer good law and that the same has been overtaken by the decision in Bango and the decision in Reliance Trading. According to the claimant what this court should be focusing on in this instance, is whether under the policy of insurance there was dishonesty or fraud which lead to financial loss being suffered by the claimant. The claimant opined that in making this determination, this court cannot rely on the decision by Justice Nyakaunda Kamanga as the standards of proof in the 2 proceedings will be different, arguing that dishonesty on its own will make the defendant liable in this instance. Finally, the claimant also noted that the defendant has acquiesced to these proceedings in terms of taking the next steps, to wit, filing responses to the application. The claimant thus concluded that the application for stay by the defendant was simply a delaying tactic. That by NBS reporting the matter to police, it did not mean that defendant had waived its right to sue. Further that even if the ex- employees are acquitted, this court will still have to render a decision in this matter In Response In response the defendant’s stated that if the ex-employees are acquitted in the criminal trial, this court cannot decide otherwise. According to the defendant, the question before this court is about fraud and that if this court does find that there was fraud and the criminal court acquits then what scenario will be created? In this regard the defendant noted that the issue is not to be about the parties but rather about the fact and issues. Thus the defendant went on to argue that the Rule is there to avoid different verdicts on the same facts and issues, The defendant then went on to state that much as this court may not be bound by the decision of Justice Nyakaunda Kamanga, the court will still have to consider the complexity of the facts in this matter. Arguing that this is a multi-million kwacha claim and that the question of prejudice goes without saying since the amount might be wrongly paid and NICO will be prejudiced. On this note the defendant did distinguish the Reliance Trading case in that in that matter there was no concurrent criminal proceedings but rather there was an investigation. Further, the defendant also noted that much as Chiumia was decided before Bango, Bango did not preclude the issue of prejudice. Further still, the defendant also noted that the criminal matter might not be discharged quickly since it involves six counts and numerous amount of evidence. In addition, the defendant also stated that this case has an embryonic relationship with the criminal case which this court should not ignore. The defendant thus denied acquiescing to these proceedings or that it is seeking a tactical advantage. The defendant then reiterated that these proceedings should be stayed. The Issues The main issue in this instance is whether these proceedings should be stayed because there are concurrent criminal proceedings before Justice Nyakaunda Kamanga which are apparently dealing with the same questions this court will also have to look at. These questions relate to issues of fraud and dishonesty, the particular question being whether the claimant’s ex-employees would be deemed to have been guilty of fraud and dishonesty, entitling the claimant in this instance to claim indemnity under a policy of insurance issued by the defendant. In such matters, the main consideration is of course the fact that courts should not find themselves in an anomalous position where they arrive at two different verdicts on the same facts and involving the same parties. Of course this raises the underlying question as to whether the court handling the civil matter is bound to follow the findings of the court handling the crimina! matter. In this regard, it must also be borne in mind that here there are two courts with similar powers and jurisdiction. At the same time however, there could also be a situation where the criminal matter is being handled by the lower court and here the question becomes whether the superior court would be “bound” by the decision in the lower court? Then there is the particular question as to what would happen if the criminal court acquits the accused persons, does that mean that this would be the end of this matter in that it will be open for the defendant to use that decision to deny liability? Alternatively, there is also the question as to what happens if there is a conviction, would then at that point, the defendant accept liability and settle this claim? This then begs the question as to whether these proceedings are ancillary to the criminal proceedings or they are stand-alone proceedings? The Law In terms of the law it must be stated that everyone has a right to institute civil proceedings and to have the claim(s) under those proceeding determined (see Panton v Financial Institutions Services Limited [2003] UKPC 8.). It was further observed in the Panton decision that it was for the defendant to show why that right should be delayed by pointing out a real and not merely a notional risk of injustice. It was also further held that a stay would not granted to serve the tactical advantages the defendant might want to retain during the criminal proceedings. Rather what has to be shown is what unjust prejudice will be caused by the continuation of the civil proceedings. The principles to be applied in such cases is that the applicant for a stay or adjournment of civil proceedings on the ground that it may prejudice actual or threatened criminal proceedings must show a real risk of serious prejudice which may lead to injustice. It has been noted, that it is not enough, for example, that both the civil and criminal proceedings arise from the same facts, or that the defence of the civil proceedings may involve the defendants in taking procedural steps such as exchanging witness statements and providing disclosure of documents which might not be imposed upon them in the crimina! proceedings. (as per Financial Services Authority v Anderson & Ors [2010] EWHC 308 (Ch.)). In terms of the principles to be applied, the same were summarized in the case of Akciné Bendrové Bankas Snoras v Antonoy & Anor [2013] EWHC 131 (Comm) as follows: i) The court has a discretion to stay civil proceedings until related criminal proceedings have been determined, but it "is a power which has to be exercised with great care and only where there is a real risk of serious prejudice which may lead to injustice"; see R v Panel on Takeovers and Mergers, ex p Fayed [1992] BCC 524, per Neill LJ at p.531E-F; cited with approval in A-G of Zambia v Meer Care & Desai & Ors [2006] EWCA Civ 390. ii) The discretion has to be exercised by reference to the competing considerations between the parties; the court has to balance justice as between the two parties; a claimant has a right to have its civil claim decided; the burden lies on a defendant to show why that right should be delayed; see Panton v Financial Institutions Services Limited [2003] UKPC 8 (PC) at f1ij. iii) A defendant must point to a real, and not merely notional, risk of injustice. As the Privy Council stated in Panton (supra): "A stay would not be granted simply to serve the tactical advantages that the defendants might want to retain in criminal proceedings. The accused's right to silence in criminal proceedings was a factor to be considered, but that right did not extend to give a defendant as a matter of right the same protection in contemporaneous civil proceedings. What had to be shown was the causing of unjust prejudice by the continuance of the civil proceedings". iv) The fact that a defendant has a right to remain silent in criminal proceedings, and would, by serving a defence in civil proceedings, be giving advance notice of his defence, carries little weight in the context of an application for a stay of civil proceedings. There is no right to invoke the privilege against self-incrimination in relation to putting in a defence, as compared with the right in civil proceedings to invoke the privilege where a defendant is being interrogated, being compelled to produce documents or cross-examined, see per Waller LJ in Vv C [2002] CP Rep 8, at paragraphs 37 and 38. In a civil trial there is no immunity against adverse comment or adverse inference from a failure to provide answers for the trial or to give evidence at the trial; a defendant does not have to put in a defence or give evidence at a civil trial but, if he does not, the court can draw an inference because in a civil trial it is not his "right" not to do so; that is important in the summary judgment context, because, if the claimant can establish his claim (for example on a summary judgment application) without interrogatories or & disclosure, then a privilege against self-incrimination is not in fact relevant; see ibid at paragraph 37. v) Moreover, today, even in criminal proceedings, at least in England and Wales, a defendant is expected to adumbrate a positive defence at an early stage. Thus the disclosure of a defence in civil proceedings is unlikely to disadvantage a defendant in criminal proceedings; vi) It is also legitimate, when balancing the competing considerations between the parties, to take into account that a positive defence is likely to exculpate, rather than incriminate, a defendant; as Waller LJ said at ibid paragraph 39: "Third, it is legitimate to start from the position that a positive defence is likely to exculpate rather than incriminate. It is legitimate to expect an explanation on oath as to the nature of the defence that the defendant has so that a court can see (a) whether there is a reason for a trial on the merits; and (b) whether the way in which having to fight the summary judgment application or the trial may impinge on the fair trial of the defendant in a criminal court. In this context, if it is obvious that a full trial must proceed and that an order for production of documents, for example, is going to be met [by] a claim of privilege against self- incrimination, postponement of the civil trial may be appropriate. But if a claimant can establish his case without compelling information or evidence from a defendant, the only relevant impact on the criminal trial to be considered is what the effect of entering a summary judgment will be. The onus is on the defendant at all stages to demonstrate that the civil process should not proceed, and the stronger the case against the defendant in the civil context the higher the onus on the defendant should be." vii) It is not enough, as Briggs J observed in FSA v Anderson [2010] EWHC 308 (Ch) at [19], that both the civil and criminal proceedings arise from the same facts, or that the defence of the civil proceedings may involve the defendant taking procedural steps such as exchanging witness statements and providing disclosure of documents which might not be imposed upon them in the criminal proceedings. viii) As Mr. Zacaroli submitted, a defendant thus has a choice between remaining silent in the civil proceedings or risk giving an indication of his defence which may be used by the prosecuting authorities, The harshness of such a choice did not provide a good ground for staying civil proceedings in Vv C (supra) or in Jefferson Limited v Bhetcha [1979] 1 WLR 898. ix) In the event that the court were to be satisfied that there would be a real risk of serious prejudice leading to injustice if the civil proceedings continue, then the proceedings should nevertheless not be stayed if safeguards can be imposed in respect of the civil proceedings which provide sufficient protection against the risk of injustice: see e.g. Re DPR Futures [1989] 1 WLR 778, per Millett J at 790G; A-G for Zambia v Meer Care & Desai & Ors (supra) at paragraphs 30-33. A proper guidance on these principles was laid out in Glazebrook v Housing [2000] UR 180 as follows: a) where there are, or may be, concurrent civil and criminal proceedings, the Jersey Courts have a discretionary power to control the conduct of the civil proceedings so as to ensure that there is no real danger of prejudice to the fair trial of existing or potential criminal proceedings b) the burden of persuading the court to exercise this power is on the person seeking such exercise re) if the same or similar questions of fact will have to be decided in both sets of proceedings, it will generally be wrong to allow a decision to be made in the civil action before it is made in the criminal proceedings, because that would create a real danger of prejudice to the fair trial of the criminal proceedings d) but it may be appropriate even in such a case to allow the interlocutory stages of the civil action to proceed so that there is not undue delay 10 e) ifand in so far as the civil action can be decided without impinging on the question of fact to be decided in the criminal proceedings, then the civil action can be allowed to go to trial. Discussion and Determination What is clear from my reading of the above authorities and my understanding of the law and procedure is that it is not enough for an applicant applying to stay a civil proceeding pending a determination of a criminal proceeding, for them to simply alleged that there would be prejudice. The law requires that the applicant must take a step further to demonstrate that there will be a real risk of injustice if the civil proceedings are allowed to proceed before the criminal case in determined. In other words, I do agree that the burden of persuading a court to stay civil proceedings always remains on the applicant. I would also agree that it is not enough that both the civil and criminal proceedings arise from the same facts, or that the defence of the civil proceedings may involve the defendants in taking procedural steps such as exchanging witness statements and providing disclosure of documents which might not be imposed upon them in the criminal proceedings. In this regard I would want to believe that the correct approach would be that, if and in so far as the civil action can be decided without impinging on the question of fact to be decided in the criminal proceedings, then the civil action can be allowed to go to trial. Granted in this instance the defendant did argue that the two courts might be dealing with the same questions regarding whether there was fraud or dishonesty and that there might be a likelihood of the 2 courts arriving at different decisions. However, there is one important consideration which has to be made in this instance which is that a decision is made for or against a party to a case and not just on the facts. Merely making a decision on the facts and issues would, in my considered view render a trial process notional. That I believe is not the intention of adversarial litigation, which requires that there must be a winner and a loser to case and that winner or loser must be the party to the case. Now what is clear in this instance is that NICO is not a party to the Criminal case so they cannot claim that there will be an injustice or prejudice against them as a party in the criminal case because they are not the ones standing trial in that case. 11 Of course there is the issue that what will be under scrutiny in the criminal case is the conduct of the ex-employees of the claimant as the criminal court will be asked to make a finding as to whether the ex-employees are guilty of, among other things, fraud. This apparently is also the question which this court has to determine in order to assess whether NICO is liable to indemnify the claimant under the policy of insurance now in question. Much as it may be true that the issues might be similar, I believe that the matter really centers around the defence which NICO has proffered. For the purposes of this proceeding, it is that defence which the court has to examine and not necessarily the verdict of the criminal court, which verdict would not be binding on this court. In this regard, I did note that the focus on the defendant’s argument was on the possibility that there might be an acquittal, which however | must state at this point is notional. In any case the fact that there might be an acquittal, would not in my view mean that these proceedings must come to an end, This is especially on account that the burden of proof in a criminal matter is always higher and that also that an acquittal can be on a technicality, Further, the question I would also ask the defendant is that if there is a conviction, then would they accept that verdict and withdraw their defence in this matter, especially considering that they are not a party to the criminal trial? I would think not since they would also want their day in trial. On this point then I had to balance the interest of both parties and I must state that I was not convinced with the defendant’s arguments. Is there a possibility that there may be different verdicts rendered by the courts? Yes there may be that possibility. However, I must state that from my aspect, the standard of proof that I would be applying will be different from that which would be applied by my sister Justice Nyakaunda Kamanga. I would be applying a lesser standard and that alone can lead to different verdicts. In any case the application that is now before me is one of summary judgment and judgment on admission. That application would merely require me to examine if the defendant has a defence on the merits and to also examine if there was an unequivocal and clear admission. Now even if the decision goes against the defendant in this instance, I do not see how this decision can be used in the criminal case for the defendant to claim that there would be prejudice. In other words, he summary judgment application will be heard mainly on the statements of case, including these defendants' own defences, which are subject to no confidentiality regime and upon documents of the defendants rather than upon oral evidence, let alone upon cross-examination. There is therefore no 12 scope for the summary judgment hearing to travel down some unexpected and prejudicial avenue, likely to lead to self-incrimination or other admissions damaging to the defendants’ defence of the potential criminal charges under investigation. This is especially in view of the fact that NICO is not facing any criminal charges. Conclusion From the foregoing, it is my considered opinion that this matter is not ancillary to the criminal case before Justice Nyakaunda Kamanga. Regardless of the decision that Justice Kamanga would render, I will still have to make a determination on this matter as the parties in this matter are different. Granted NBS bank is a claimant in the criminal proceedings but in a criminal case the parties are the State and the accused persons and never the complainant who is just supposed to provide evidence. The risk of injustice is the primary objective which I must consider and considering that NICO is not a party in the criminal proceedings, but rather have filed their own independent defence in this instance, I do not see how any injustice can arise. I further do not see how they can claim prejudice. Of course Counsel did intimate that their application was also to protect the integrity of the courts, however I must state that among the duties that counsel owes to the court, protection of the integrity of the courts is one of them, That duty falls on the court. On fhis note | thus must dismiss the application fo Oth costs to the (ees ‘ QIK Made in Chambers this. ..7: Qt y of... /\WS Lee deveenetseeaeeneenees 2020 Z_& C”K. T. MANDA JUDGE 13