Law and consideration of the issues
I have already set out the principle issue that arises, and fall, to be decided.
Further, it will be recollected that there are also other minor issues that require to be determined as the main one is being considered.
It is proposed that, as part of the process of addressing both the major and ancillary issues, the Court should highlight and address
topical matters that will go a long way in addressing the facts in dispute in this action. Here are the said topical issues and the
Court’s view on them.
Effect of Agreement between the 1st Plaintiff and the Defendant bank
The starting point in resolving the issues in this matter is to look at the effect
of the agreement that was entered into between the 1st Plaintiff and the Defendant bank. The agreement being referred to is the one for the sale of land at Maselema, vz Title No. Chichiri 52.
The law, as I understand it, is that where there is a binding contract for sale of
land the purchaser acquires an equitable interest in the land and the vendor becomes a trustee for the purchaser. Further, it is a well settled principle of law that if there be a balance of the purchase price then the vendor has a lien in the
land and would enforce it by the usual methods for the payment of a debt. Moreover, the position at law is that a vendor would be deemed to be in breach of trust if he tried to sell the land to a third
party where time of making the payment of the balance was not an essential term of the contract and not provision was given as to
what the legal position of the parties would be if the purchaser defaulted to make the payment at that time.
As regards the question whether time is of essence in a contract for the sale of
land the position at law is that in such type of contracts time is generally not of essence unless the contracting parties [contract
itself] clearly and expressly stipulates it to be so. Further, the following dictum of Denning L.J. in Williams vs Greatrex 1 WLR 31 @ 35 is illuminating:
“It is said by Mr Meurig Evans that time was of the essence of the contract of May1946, and that if the purchase of any plots was not
completed within the two years then stated, there could be no further claim in respect of any such plots. He said that it was a commercial
transaction and that therefore time should be considered of the essence. I cannot agree to that argument. It seems to me that this
was a contract for the purchase of land, in which the parties, through their own common solicitor, put forward the period of two
years as their target for completion; but that was, as is usual in cases of the sale of land, only a target: it was not something
which was of the essence of the matter. Our legal procedure is well adapted to meet such a situation. If either side wanted to bring the other up to the mark, all he had
to do was to give him reasonable notice requiring him to complete. Neither side did so, and, therefore, time is not by itself a bar to the action.” [underlining supplied by me]
I adopt this statement and observe that it does represent the position at law currently
obtaining in Malawi.
Finally, this Court understands the law to be that the vendor’s lien for the unpaid purchase price arises as soon as the contract
for the sale of land is signed or agreed and still exists until actual payment is made.
Did any of the parties breach the Agreement for the sale of land?
As stated earlier, the agreement that was entered into between the 1st Plaintiff and the Defendant for the sale of land bank fell through. Neither party accepts the blame for the failure of the said agreement.
Indeed, the 1st Plaintiff has contended that the Defendant breached the agreement by selling the land to a third party while the Defendant bank says
it cannot be faulted because the 1st Plaintiff failed to pay the balance of the purchase price. Who is to blame then? In this Court’s judgment the Defendant bank
breached the agreement for the sale of the land. Why do I say so? For starters, time was not of essence of the contract for the sale
of the land in question. If it were of essence surely the parties would have clearly and expressly provided in the contract that
in the event of the 1st Plaintiff’s failure to pay the balance the Defendant was going to sell the land to somebody else. This they did not do. Further, the Court has observed that the sale agreement did not expressly state that time was of essence for
making the payments of the instalments towards the purchase of the land. In such situations, where the agreement does not so expressly
state, the Court has held that it should be presumed that time for the payments of the agreed instalments was not of the essence. Actually, this Court finds that the facts of the present case are on all fours with the Humphrey’s case. Accordinly, the Defendant was wrong in proceeding to sell the land to a thirty party on the ground that the 1st Plaintiff had failed to pay the balance of the purchase price. Further, it is well to remember that the Defendant bank’s remedy,
when it could not get the balance of the purchase price, was to resort to enforcement of its rights to the purchase price by way
of an order of specific performance or indeed by the usual method of claiming the money through the Court as a debt due to it. By proceeding to sell the land to a third party the Defendant bank breached the contract of sale of land it entered with the 1st Plaintiff. Indeed, the Defendant bank breached its obligation as a trustee for the 1st Plaintiff since there was a binding contract for the sale of the land where no provision was made that it could sell the land if
the 1st Plaintiff defaulted to make payment of the balance of the purchase price.
In sum, this Court finds, and concludes, that the Defendant breached the contract
for sale of the land the subject-matter of this action. Put in another way, the Defendant was in the wrong by selling the land to
another person when it should have resorted to having the balance of the purchase price or indeed seek the remedy of specific performance.
What remedy is available to the 1st Plaintiff?
The Court has found that the Defendant breached the contract for sale of land made
between it and the 1st Plaintiff. However, this does not in anyway completely dispose of the matter. I must proceed to decide on what remedy, if any, is
available to the 1st Plaintiff as an innocent party.
The 1st Plaintiff contends that he is entitled to damages for breach of contract. He further prays that he be refunded the deposit he paid
to the Defendant bank as part payment of the purchase price in the sum of K15,000,000 (fifteen million kwacha) with interest. The
1st Plaintiff’s statement of claim also shows that he wants this Court to give him such further or other appropriate relief.
With regard to the claim for a refund of the said deposit of the purchase price the
Defendant bank’s response is that the figure put by the 1st Plaintiff is not entirely correct. This comes out clearly in the Defendant banks’ Amended Defence where it avers that part
of the money used by the Plaintiff was its money in the sum of K6,000,000 (six million kwacha). It is the view of the Defendant that
this sum of K6,000,000 plus interest must be deducted from the total payments that were made by the 1st Plaintiff towards the purchase of the land.
As I understand it, the Defendant bank is not denying that the 1st Plaintiff would be entitled to a refund but that the refund must take into account the fact that the bank partly financed the purchase
of the land. Thus, so the contention by the bank goes, from whatever refund is made there must be deducted the said sum of K6,000,000
plus interest at bank lending rate.
I wish to pause here and make some observations. Firstly, the argument of the Defendant
ignores the fact that the said K6,000,000 was given to the 2nd Plaintiff as an overdraft facility. Further, it would appear that the Defendant has chosen to overlook a term of the agreement of
9th December to the effect that the overdraft was meant to regularize the overdraft that was being maintained by the 2nd Plaintiff with the Defendant. In its latter of 29th May 2002 the Defendant, inter alia, advised the 1st Plaintiff at paragraph 5 of the letter that “you shall regularize the overdraft account of the Midway Filling Station (2nd Plaintiff) by paying up immediately the over due interest of about K3,000,000 and start operating the account on a fluctuating basis
within the sanctioned limit of K6,000,000. further, under Clause 2 of the Agreement the parties covenanted that the 1st Plaintiff shall regularize the overdraft account maintained by Midway Filling Station (2nd Plaintiff) by paying all over due interest and to continue to operate the said account on a fluctuating basis within the limits sanctioned
by the Defendant bank. Moreover, the Defendant bank seems to be giving a blind eye to the piece of evidence before this Court to
the effect that the overdraft was given to the 2nd Plaintiff who is not one and the same person as the 1st Plaintiff. Accordingly, it is important that the deposit that was paid by the 1st Plaintiff as part of the purchase price must be treated differently from the overdraft facility that was accorded to the 2nd Plaintiff.
Turning back to the instant case this Court has not been left in doubt that, at law,
the 1st Plaintiff would be entitled to a refund of whatever he paid towards the purchasing of the land. Further, the Court is fortified in this view considering what the party agreed on 9th December 2002. Pursuant to Clause 6 of contract for sale of land dated the said 9th of December 2002 the 1st Plaintiff and the Defendant agreed, inter alia, that:
“In the event of the transfer of land not taking place for any reason the vendor (the Defendant bank) shall refund the purchase price
paid by the Purchaser (the 1st Plaintiff) in full less all sums as may be lawfully due to the vendor (the Defendant)”
The essence of this clause is that Defendant agreed to refund the purchase price should the transfer not take place for any reason.
In terms of the Defendant bank’s own letter of 29th May 2002, which is further acknowledged in the said agreement dated 9th December 2002, the 1st Plaintiff paid a deposit in the sum of K15,850,000 (fifteen million eight hundred and fifty thousand kwacha) to the Defendant. The
Court has found and concluded that there are no sums that are lawfully due to the Defendant from the 1st Plaintiff. The Court shall soon demonstrate why it is saying that there no are no monies lawfully due to the Defendant. It follows,
therefore, that this sum of K15,850,000 must be refunded to the 1st Plaintiff. It is so ordered .
Is interest payable on refund of the deposit?
The 1st Plaintiff has asked this Court that it orders that the money he paid as deposit for the purchase of the land should be refunded with
interest at a comparable bank lending rates for money due and owing on commercial rates. However, the 1st Plaintiff has not indicated the date from which the said interest should be payable. In the opinion of this Court, if indeed the
interest be payable, it should be payable from the date the 1st Plaintiff accepted the breach on the part of the Defendant bank and demanded a refund of the deposit paid by him. The date in question
is the 9th day of April 2003 when the 1st Plaintiff wrote the Defendant in the following terms:
9th April, 2003
Messrs Chagwamnjira & Company
P.O. Box 51865
RE: BREACH OF CONTRACT BY FINANCE BANK OF MALAWI LIMITED – TITLE NUMBER CHICHIR 52 (PLOT NO. CC 42)
We refer to the above matter.
It has come to our client’s attention that the above property which was sold to him has now been put up for sale through an
advertisement in the paper. The advertisement appeared in the Daily Times edition of the 31st March, 2003.
Our client considers the action taken by you client to be in breach of the contract of sale dated 9th December, 2002. Our client accepts the breach and now considers the contract of sale of land to be at an end. We therefore formally
demand a refund of the purchase price paid by him, in accordance with clause 6 of the Agreement for Sale.
FOR: TEMBENU, MASUMBU & COMPANY
Mr I.I. Lorgat
P.O. Box 51168
We will assume that this letter was brought to the attention of the Defendant although it was addressed to its lawyers. Further, it
will be safe to presume that the demand bank seven(7) days from the date of the letter. Accordingly, the interest, if payable, must
be from the 16th day of April 2003.
On whether interest is payable this Court holds the view that as a matter of law it is payable where a purchase price for land is
refunded due to a beach of contract by the vendor. Indeed, my understanding of the law is that the interest is payable because it is presumed that the party in breach benefited from
the money paid as deposit for which the wrongdoer must compensate the wronged party by paying interest. Further, it appears to be settled law that a purchaser who rescinds a contract following the vendor’s repudiatory breach of
a contract is entitled to recover the deposit paid together with interest.
It is well to observe that this Court has found that the Defendant breached the contract
of sale of the land. Further, the Court has ordered that the remedy for that breach is that the Defendant should refund the money
that was paid as part of the purchase price of the land. Additionally, this Court finds and concludes that the Defendant was in a
repudiatory breach of the contract for the sale of the said land. In my judgment, indeed from the discussion of the law above, the
refund of the money which this Court has ordered must be with interest. It is so ordered that the Defendant shall refund the said
sum of K15,850,000 with interest from the 16th day of April 2003.
As regards the rate of interest the 1st Plaintiff wants that Commercial bank lending rates should apply. The position taken by the 1st Plaintiff is acceptable at law. This Court accepts this plea and orders that the bank lending rate in operation from time to time since 16th April 2003 will apply. Consequently, the Defendant bank shall refund the said sum of K15,850,000 together with interest and the rate
of interest shall be the bank lending rates that have been applying from 16th April 2003 to date of refund of part of the purchase price paid herein.
The Defendant bank’s pleadings show that it has sought to put up a defence
of set-off and the Defendant is counter claiming from the 1st Plaintiff some liquidated sums of money. Indeed, the Defendant bank has contended that from whatever is found to be due to the 1st Plaintiff there must be set-off some sums of money. The said money is in respect of some overdraft facilities and/or loans that were
given to Karibu Food Products and Midway Filling Station (Pvt) Ltd. According to the Defendant’s calculation the two overdraft
facilities together with interest amount to the sum of K14,065,703.37 which the 1st Plaintiff ought to pay to it. It is in evidence that the two loan accounts for Karibu Food Products and Midway Filling Station Limited
were consolidated without the sanction of the two entities. Moreover, the record of these proceedings show that the facility that
was accorded to Karibu Food Products was secured by the 1st Plaintiff’s two properties. Additionally, the Defendant bank has not disputed the fact that it has since sold one of the said
two properties that it and is still holding on to one of the properties.
As noted above the Defendant is essentially raising up the defence of set-off. Now
the question as to what is a set-off is to be determined as a matter of law and is not in any way governed by the language used by
the parties in their pleadings. It is for this reason that, notwithstanding the Defendant bank’s use of the word counter claim in its pleadings, the Court
has found that the Defendant bank has basically raised the defence of set-off.
Further, it is a settled principle of law, which needs no citation of authority,
that the defence of set-off is only available in respect of debts or liquidated demands due between the same parties in the same
right. Further, this Court is a live to the law that the defence of set off by the Defendant bank can only arise against a claim
arising out of the same transaction between the same parties whether sounding in debt or unliquidated damages. In the present case no evidence was offered by the Defendant to show that Midway Filling Station (Pvt) Ltd and Karibu Food Products
are the same persons as the 1st Plaintiff Mr Ismail Ibrabim Lorgat. It is trite law that a limited liability has a personality of its own independent from its shareholders
or promoters. Further, with regard to Karibu Food Products it is important to note that the overdraft facility that was extended
to it was a secured one and it was a different transaction not in any way connected with the purchase of the land the subject-matter
of this action. Therefore, it would be wrong in principle to seek to raise the defence of set-off where the transaction between Karibu
Food Products and the Defendant is a different transaction altogether. Moreover, it is well to observe that the overdraft facility
to Midway Filling Station (Pvt)Ltd was a separate transaction that ought not have been mixed up with the overdraft facility to Karibu
Finally, this Court understands the position at law to be that the sum that a party
wishes to be set-off, like the Defendant wants, must have accrued at the commencement of an action. But in the instant matter, commenced on 15th March 2002, it has not been pleaded that the sum the Defendant wants to be set-off had accrued. All there is to it is that by 15th April 2003 the so called loans by Midway Filling Station (Pvt)Ltd and Karibu Food Products had arisen to certain sums. There is no
allegation of fact that at the time when the 1st Plaintiff or the 2nd Plaintiff commenced their action there was a demand made for either Midway Filling Station Limited or Karibu Food Products to liquidate
or settle or make good the overdraft facilities that were given to the latter. Further, there is no evidence adduced by the Defendant
that they previously made such a demand for settlement of the overdraft facilities which Midway Filling Service Stations (Pvt)Ltd/or
Karibu Food Products failed to do. If they had failed then surely one would say an action would have accrued entitling the Defendant
to raise the defence of set-off. In the absence of the evidence of such demand the defence of set-off raised by the Defendant must
fail. Accordingly, this Court finds and concludes that the Defendant’s counter claim, which is for intents and purposes a set-off,
is dismissed. It is dismissed with costs.
The Plaintiff’s action has succeeded. The action succeeds with costs to be taxed by the Registrar if not agreed between the
Pronounced in open Court this 13th day of May 2005 at the Principal Registry, Blantyre.
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