CFAO Motors Limited v NBS Bank plc (MSCA Civil Application 21 of 2023) [2024] MWSC 8 (12 April 2024)

Bae roe IN THE MALAWI SUPREME COURT OF APPEAL. AT BLANTYRE MSCA CIVIL APPLICATION NO. 21 OF 2023 (Being Commercial Case No. 159 of 2019 at the High Court of Malawi Commercial Division, Blantyre Registry)

BETWEEN: CFAO MOTORS LIMITED (Formerly Known as CFAO Malawi Limited).........+:+s+s+ssseseseseseseeeeeee APPELLANT AND NBS BANK PLC.......sssscessssessssesssssseseeserseseassescenseceeseeeeRESPONDENT

Coram

THE HON. JUSTICE MR S.A. KALEMBERA JA

Mr Maziko Sauti-Phiri, of Counsel for the Applicant

Mr P. Mpaka, of Counsel for the Respondent

Mrs M. Mthunzi, Recording Officer

Ruling

Kalembera JA This is the Court’s Ruling on the Appellant’s Inter-Partes Application for Stay of Execution Pending Appeal, following the Ruling of Alide, J in the High Court, Commercial Division, Blantyre Registry, Commercial Case No.159 of 2019 dismissing an application for stay pending appeal. The application brought Order I rule 18 of the Supreme Court of Appeal Rules (SCAR). It is supported by a Sworn. ‘Statement of Maziko Sauti-Phiri, of counsel for the Appellant dated 27" April 2023, as well as skeletal arguments. The Respondent opposes the Application, The Respodent has thus, filed an Affidavit in Opposition sworn by Patrick Gray Mpaka, of counsel for the Respondent, as well as skeletal arguments.

Itis important to mention that, in the Court below, the Appellant was not only seeking for stay of execution pending appeal. The Appellant also applied for an order for leave to appeal against the summary judgment of the Court below dated 9 November 2020 finalized with the ruling of the Assistant Registrar in assessment of interest or any other such terms as the Court deems appropriate; and consequential orders, namely; setting aside the seizure and sale order dated 22 December 2021 ex debito justitiae; and refund by the claimant to the defendant sheriff fees of K259 million.

It is further important to note, that the application for leave to appeal against the summary judgment was duly granted to the Appellant. However, the application for stay pending appeal, was not granted. Thus, the Appellant brings an application for stay pending appeal pursuant to Order I rule

18. Against the refusal to grant the said consequential orders, the Appellant has now filed what he terms an amended notice of appeal dated 28 April 2023.

Ithhas been deponed by counsel for the Appellant that On 26 November 2021, the Registrar of the Court below finalized by assessment of interest a summary judgment dated 9 November 2020. The Judgment is in respect of interest arising out or in in respect of a forward contract made between NBS Bank ple (NBS) and CFAO. Motors Ltd (CFAO). On or about 24 December 2021, CFAO paid into court the assessed interest sum of KI .6 billion pending an application to stay. On 21 April 2023, the learned trial Judge refused to grant a stay, and also ruled that the sum of K1.6 billion, which was in court, should be paid over to NBS.

Counsel further deponed that CFAO has been granted leave to appeal, and has appealed against the ruling of 21 April 2023 as per attached copy leave to appeal and notice of appeal marked “MSPI”. On 12 December 2022, the Supreme Court delivered a landmark ruling in NBS Bank ple v Capital Oil Refining Industries, MSCA Civil Appeal No. 48 of 2017 (unreported). This case, is also about a forward contract entered into March 2012 or thereabouts. The case, like here, also involved a question of refund of money paid in advance of the forward contract, and interest. The Supreme Court has ruled that the forward contract transaction contravened Exchange Control regulations and as such that the whole transaction is illegal. The Supreme Court has also said that any money paid in respect thereof is refundable,

but without interest, as it is against public policy and interest for a court to award interest where the contract is tainted with illegality.

Counsel then informed the Court that he represents CFAO in a separate, but related case, which is a claim by CFAO against NBS for a refund or return of money CFAO paid to NBS in advance of a forward contract, which failed. On 2 February 2023, NBS served an amended defense in that action. In this amended defense, NBS has admitted that the forward contract it entered into on or about March 2012 is illegal as per attached copy of the amended defense containing the admission marked as “MSP2”.

Finally, Counsel told the Court that on 27 April 2023, the learned trial judge refused stay of his judgment being appealed against. In terms of security for costs, CFAO applies that the money paid into court, which is a substantial one, acts as security to NBS. Even if this is not so, in the event the appeal is not favorable to CFAO. He further requested the Court to take judicial notice that the former CFAO Malawi Ltd has been merged with the former Toyota Malawi Ltd into one company called CFAO Motors Limited. The combined company has much larger balance sheet than the former CFAO Malawi Limited, and therefore would be able to pay back in the unlikely event that the appeal is unsuccessful

As already stated, the application herein is opposed. The Respondent, through coumsel, averred that full history of the present matter is well articulated in the Ruling of the High Court dated 21 April 2023. 1 will now proceed to lay the background as laid in the Ruling of the High Court.

‘The Respondent (claimant in the Court below) commenced this matter against the Appellant (defendant in the Court below) for two declarations, namely; that the CFAO had been unjustly enriched with the use and possession of the sum of MKS66, 5 16,764.51, from around 25 October 2013 to around 14 March 2019; and that the NBS Bank was entitled to restitution of all the proceeds derived from the defendant's possession and use of the said sum by way of compound interest calculated across the period that the Appellant had the use and possession of the said sum.

After the exchange of the statement of case and the defense, the Respondent took out an application for summary judgment in respect of the matter. The Appellant on the other hand took out an application for consolidation of this matter

with Commercial Case No. 134 of 2013 involving the same parties. Both applications were called for hearing on the same day. On the date set down for the hearing of the applications, the court declined to consolidate the matter with Commercial Case number 134 of 2013, and proceeded to hear the application for summary judgement.

On 9 November 2020, the Court below delivered a summary judgement in favor of the Respondent. At that point, the Appellant did not file any appeal against both the summary judgment and the court's order declining consolidation of the matters, The matter proceeded for assessment of interest. On 26 November 2021, the Assistant Registrar awarded the Respondent the sum of K 1,665,148,855.97 upon assessment of the interest.

On 10 December 2021, the Appellant appeared before the Court below and obtained two orders, without notice. First, an order staying the execution of the order ‘on assessment of interest pending the hearing and determination of the Appellant's appeal or the trial of Commercial Case No. 134 of 2013, and second, an order pending final determination of the appeal the Appellant lodged against the judgment of the Court below in this matter.

On the same day, the Appellant served the Respondent with a notice of appeal against the summary judgment of 9 November 2020, and the Assistant Registrar's ruling on assessment of interest. It must be stated that the said notice of appeal has not been attached to the present application. The Appellant only attached the purported amended notice of appeal. However, it is quite evident then that the grounds of appeal in the original notice of appeal, as filed on 10 December 2021 were against the summary judgment and the ruling on assessment of interest.

On 17 December 2021, the Court below set aside the orders made on 10 December 2021 upon a without notice application by the Respondent. The Court below further directed that in the event the Appellant was desirous of making any further application in respect of the two orders, the same were to be filed with notice to the other party. On the same day, the Respondent took out further processes in order to enforce the judgement debt, Accordingly, interim third-party debt orders were issued against the Appellant's bankers.

The pages read for this report end here. The judgment continues in the PDF.