The Registered Trustees of Annie's Lodge and Another v Fatchi (Commercial Cause 17 of 2024) [2024] MWHC 49 (5 September 2024)

REPUBLIC OF MALAWI IN THE HIGH COURT OF MALAWI COMMERCIAL DIVISION BLANTYRE REGISTRY COMMERCIAL CAUSE NUMBER 17 OF 2024 THE REGISTERED TRUSTEES OF ANNIE’S LODGE bE CLAIMANT CHRISTIAN THOMPSON 2"¢ CLAIMANT VERSUS LODZANI FRANK HAPANA FATCHI DEFENDANT CORAM: HON. JUSTICE J. ALIDE Ms. A. Tolani, of counsel for the claimants Mr. J. Masumbu, of counsel for the defendant Mr. B. Ntonya, Court Clerk RULING 1.0 2.0 The undisputed facts of the matter, in brief, are that the 1 Claimant and the Defendant entered into a Loan Agreement in which the Defendant advanced the Claimant the sum of K150,000,000 (One Hundred and Fifty Million Kwacha). As security for the loan, the 1" Claimant surrendered to the Defendant title deeds for its property on Deed Plan Number 554/2020, known as Piece Number 817 of 1.074 hectares, located in Liwonde Township. The 1 Claimant also executed a Power of Attorney in favour of the Defendant giving him power to sale the property in the event of the Claimant’s default on its loan obligations. The 1“ Claimant defaulted on its loan obligations and the Defendant sold the property to third parties. . At the time that the Defendant was effecting the sale, the 1* Claimant was running a business on the property in the name and style of Liwonde Lodge. It was the 1* Claimant contention that at the time the Defendant was selling the property to the third parties, he included some of the 1 Claimant’s items that were in use for its business but were not part of the security for the loan. It is also the 2" Claimants contention that the Defendant also sold a piece of land adjacent to the property known as Lot B which was owned by the 2" Claimant. This is what has given rise to this dispute. 3.0 4.0 5.0 6.0 Accordingly, by a Writ of Summons, the Claimants commenced an action against the Defendant and detailed the reliefs they were seeking as follows: (a) Compensation for illegally withholding, preventing, taking, and using all trust property, belongings, items, and furniture, including Lot B of Plot Number 817 which did not constitute a deed for the Liwonde Lodge, but were sold along with it. (b) Return of all trust property, belongings, items, and furniture which do not constitute a deed for the Liwonde Lodge but were illegally sold along with it. (c) Payment of the sum of MK1,200,000 which was used as transport to collect personal items. (d) Costs for the damages caused due to illegal use, delay and wear and tear of the said trust property; and (e) Costs of the action. The Claimants further took out an ex-parte application for an interlocutory injunction against the Defendant restraining him, either by himself or through his agents, servants and all employees, including the said buyers from withholding, possessing and use of the property and items pending the Court’s determination, or further order, on the matter. This Court granted the order subject to the Claimants’ filing of an inter-partes application for the continuance of the same. This is the application before this Court now. The application was filed pursuant to Order 10 Rule 1, and 27 of the Courts (High Court) Civil Procedure Rules 2017 (“the CPR 2017”). It was supported by a sworn statement, and a sworn statement in reply filed by Annie Fletcher, one of the 1* Claimant’s trustees, for an on behalf of the Claimants. Counsel also filed skeleton arguments in support of the continuation of the interlocutory injunction. The application was opposed through a sworn statement filed by the Defendant. Counsel for the Defendant also filed skeleton arguments accordingly. The parties also filed supplementary sworn statements verifying list of items that had been delivered to the Claimant. The gist of the Claimants’ contention is that the only property that was pledged as security for the loan was the leasehold property on Deed Plan Number 554/2020, known as Piece Number 817 of 1.074 hectares, and not otherwise. The Claimants submitted that the Defendant was not entitled to sell any other property that was not covered under the security arrangement include\ing the 2" Claimant’s piece of land adjacent to the property, and the 1*' Claimant’s items and fixtures that were used in the operation of its lodge. This included chairs, fridges, beds, mattresses, cookers, air-conditioners, generator sets, solar pumps and other items, as well as personal items belonging to Annie Fletcher, one of the trustees. The 1 Claimant argued that despite having written 2 7.0 8.0 9.0 10.0 11.0 the Defendant, the Claimants were not accorded any opportunity to properly hand over the property to the Defendant. The Defendant just took it up upon himself and went ahead and sold the leasehold land with the 1 Claimant’s property, and other items on the land, including land belonging to the second Claimant, in contravention to the Loan Agreement that the parties had entered. Accordingly, the Claimant prayed for the continuation of the interlocutory injunction. In opposition, the Defendant admitted having exercised his power under the Power of Attorney and sold the property to Mabvuto Gadaga and Euristo Candido Gadaga (the Buyers). He submitted that the assignment of the lease over the property had since been executed and registered accordingly. He argued that upon the assignment of the lease to the Buyers, he had no proprietary rights over the property was no longer in control of the same. The Defendant argued that the 1*' Claimant had pledged the property as security, including the lodge business as a going concern, and referred to a Valuation Report that he had exhibited as “LFHF 1”. The Defendant argued that since the property that was pledged as security included the lodge business, it was clear to him that it included the air conditioners, beddings, clothing, television sets, fridges, cookers and all the other items that were used or attached to the lodge. The Defendant submitted that he was willing, and was ready, to deliver personal assets belonging to Annie Fletcher but had failed to do so because she had refused, and/or neglected, to collect the same and had preferred to apply for an order of an interlocutory injunction. The Defendant further argued that having sold the lodge the remedy against him was only in damages, and that the order for interlocutory injunction was directed at the wrong party as he had no proprietary interest in the property after the re- assignment of the lease was registered, He therefore prayed for the discharge of the order with costs. In reply, the Claimants argued that the sale of the property and the lodge business as a going concern did not arise at all as it was not part of the Loan Agreement entered into between the Claimant and the Defendant. The Claimants maintained that all the parties had agreed as security was the leasehold property on Deed Plan Number 554/2020, known as Piece Number 817 of 1.074 hectares, and not otherwise. They argued that the decision to sell the trust property in use at the lodge was done on the Defendant’s own accord and had no basis. The Claimants further argued that order for the interlocutory injunction was directed at the Defendant and his agents and in their mind this ably covered the Buyers contractual agreement between the three of them. Having heard both parties, it is upon this Court to determine whether it should perpetuate, or not, the order of interlocutory injunction that it granted to the Claimants in this matter. Order 10 Rule 27 of the CPR 2017 provides that: 12.0 13.0 14.0 “The Court may, on application, grant an injunction by an interlocutory order where it appears to the court that: (a) there is a serious question to be tried; (b) damages may not be an adequate remedy; and (c) if shall be just te do so, and the order may be made unconditionaily or on such terms or conditions as the Court considers just.” Order 10 rule 27 codifies the important principles and guidelines to be considered in applications of the present nature which were laid down in the leading authority of American Cyanamid Co. v Ethicon Limited [1975] 2 W.L.R. 316. The important dicta on the case were summarised by Tembo, J. in the case of Jan Kanyuka v Thom Chiumia and Others Civil Cause No. 58 of 2003 HC (unreported) in which he said: “The principles to be applied in applications for interlocutory injunctions have been authoritatively explained by Lord Diplock in American Cyanamid Co, v Ethicon. The plaintiff must establish that he has a good arguable claim to the right he seeks to protect. The court must not attempt to decide the claim on the affidavits; it is enough if the plaintiff shows that there is a serious question to be tried. If the plaintiff satisfies these tests, the grant or refusal of an injunction is a matter for the court’s discretion on a balance of convenience. Thus, the court ought to consider whether damages would be a sufficient remedy. If so, an injunction ought not to be granted. Damages may not be a sufficient remedy if the wrongdoer is unlikely to be able to pay them. Besides, damages may not be a sufficient remedy if the wrong in question ts irreparable or is outside the scope of pecuniary compensation or if the damages would be difficult to assess. It will generally be material for the court to consider whether more harm will be done by granting or refusing to grant an injunction. In particular, it will usually be wiser to delay a new activity rather than to risk damaging one that is already established,” It is also trite that the usual purpose of an interlocutory injunction is to preserve the status quo until the rights of the parties have been determined in the action. The injunction will almost always be negative in form, thus, to restrain the defendant from doing some act. Therefore, in considering granting or refusing an injunction, courts must as much as possible try to preserve the status quo of the parties. When presented with an application for an interlocutory injunction, the first thing that the Court should do before it considers whether to grant or not grant an interlocutory injunction is to determine if there is a serious question to be tried or whether the applicant discloses a good and arguable claim to the right that he/she seeks to protect. At this point, the court should not go into the full details and examine the merits or demerits of the action. Further, the court must also avoid the temptation to resolve or determine complicated legal or factual questions that can only be appreciated through evidence or legal arguments presented during trial. It should simply confine itself on the sworn statements to determine the above. It is only upon determination of the 15.0 16.0 17.0 18.0 foregoing that the court will proceed and look at the other elements i.e. whether damages may not be an adequate remedy or not, and whether it shall be just to grant the injunction or not. Looking at the sworn statements filed by both parties, in support and in opposition to the application, it is not in dispute that the 1 Claimant and the Defendant entered into a Loan Agreement for the sum of K150,000,000 (One Hundred and Fifty Million Kwacha) which sum the Defendant lent to the 1“ Claimant, As part of the agreement, the Claimant offered its property on leasehold land Deed Plan Number 554/2020, known as Piece Number 817 of 1,074 hectares located in Liwonde Township, and further executed a Power of Attorney in favour of the Defendant. The Power of Attorney allowed the Defendant to sell the said property in case of default by the ist Claimant on ifs loan obligations. Unfortunately, the 1 Claimant defaulted on its obligations and the Defendant sold the property. Article 2.1 of the Loan Agreement between the Defendant and the 1* Claimant under Conditions Precedent provided as follows: “2.1 The Registered Trustees of Annies Trust shall surrender the title deed for Piece Number 817 at Liwonde Township to Lodzani Hapana Fatchi and the same shall be returned upon payment of the sum of K150,000,000 (One Hundred and Fifty Million Kwacha Only). Article 3 of the Loan Agreement titled “Breach of Agreement” under sub-article 3.1 and 3.2 provides as follows: “3.1 In the event that The Registered Trustees of Annies Trust breaches the Agreement, they shall co-operate in transferring ownership of the property situate on Piece Number 817 at Liwonde Township in Machinga District to Lodzani Frank Hapana Fatchi.” “3.2 Lodzani Frank Hapana Fatchi will register a Caution over the said property known as Piece Number 817 at Liwonde Township in Machinga District to be registered at Deeds Registry in Blantyre. Paragraph 2 of the Power of Attorney granted by the 1* Claimant to the Defendant exhibited as “TAT2” reads as follows: “This Power of Attorney has been granted in consideration of financial facilities amounting to K150,000,000 (One Hundred and Fifty Million Kwacha Only) extended to The registered Trustees of Annies Trust by Lodzani Frank Hapana Fatchi who is by this Power of Attorney empowered to realise security through sale in the event of our default or inability to pay the money hereby secured.” The long and the short of the Loan Agreement and the Power of Attorney is that the i" Claimant was required to surrender the title deed for the property as security for the 5 19.0 20.9 21.0 22.0 loan that was advanced by the Defendant to the 1‘ Claimant, and that upon the i* Claimant’s failure to adhere to the agreement, the Defendant had been given power to sell the same. Notwithstanding the above clear provisions, there is a dispute between the Claimants and the Defendant on what property was subject of the sale. While the Claimant is of the view that the Defendant was not entitled to sell some of the items that were on the property, such as the land adjacent to the property known as Lot B, as well as some items that had been in use at the lodge, the Defendant is of the view that the agreement between the parties was for the property to be sold together with the lodge business as a going concern. In paragraphs 4 and 5 of the Defendant’s sworn statement in opposition to the application he confirms his interpretation of the agreement by stating as follows: “4. THAT it is clear from the Valuation Report that what was pledged was the lodge as a going concern. 5. THAT included obviously the air conditioners, beddings, and clothing and Television sets attached to the rooms at the lodge.” During the hearing of the application, the Defendant insisted that he had delivered all the property that was supposed to have been delivered to the Claimants including personal property for Ms. Anne Fletcher, and that what had been retained was property such as the air conditioners, beddings, clothing, television sets, that was part of the lodge business and had been realised and sold as part of the security for the loan. The Claimants argue otherwise. Looking at the positions taken by the parties, it is my view that there is a serious question here that the court needs to answer namely whether or not the Defendant exercised his power of sale within the limits provided by the agreement between the parties or exceeded the same. In determining the same, it is important that the Cout goes into details of the same which may include examining of witnesses and having recourse to the provisions of the law. This cannot be done at this stage. Having found that there is a serious question to be tried, the second question that this court must answer is whether damages are an adequate remedy in the circumstances, It is settled that the court should not grant an injunction where damages are an adequate remedy, Damages may not be an adequate remedy if the wrong is irreparable, or outside the scope of pecuniary compensation, or if damages would be difficult to assess, See Woodland v Smith [1970] 1 All ER 1091. The court would still proceed and grant an injunction where damages are an adequate remedy if it is apparent that the respondent would not be able to pay them. 23.0 24.0 25.0 26.0 27.0 In the present matter what is in contention is the Defendant’s retention and use of property forming part of the lodge, as well as the retention of a piece of land known as Lot B attaching to the property. In my view it would be very difficult to quantify damages for the use of the retained land and items which had been sold as part of the property should the Court find in the Claimants favour. Worse still, items like clothing and beddings are very perishable pieces of items such that in no time, they will be affected by wear and tear because of their continued use. By the time the matter gets to its conclusions some of the items will have long been gone, others affected by wear and tear and others heavily depreciated in value. It is my view therefore that damages may not be an adequate remedy in this matter. On whether it shall be just or not to grant and interlocutory injunction, it is important that the Court should look at the practical realities and balance the risk of doing an injustice to either party by the refusal or grant of an injunction. See N.W.L Limited v Woods [1979]1 WLR 1294. Having considered all the facts in respect of the matter, it is my view that it is just in the circumstances to maintain the interlocutory injunction. As I conclude, I thought I should address the issue raised by the Defendant to the effect that since they had sold the property and transferred the same to the buyers he had no interest in the same and should not be part of the present action. My view is that it is very clear that the Defendant sold the property in haste and in a manner that raises questions as to the scope of what had been sold, and also as to whether the sale was concluded in good faith or not. In my view, it is important that the Defendant remains part of the action because he has some answers to provide in respect of how the whole transaction was handled. Overall, and in conclusion, it is my view that the order of an interlocutory injunction obtained by the Claimant here in be, and it is hereby, perpetuated until the resolution of the substantive matter herein or any further order of the Court. On costs, these are awarded at the court’s discretion but usually they follow the event. 1 award the Claimants the same in respect of this present application. Made in chambers at Blantyre this i September 2024. \ Jabbar Alife JUDGE