HIGH COURT OF
MISCELLANEOUS CIVIL CAUSE NUMBER 110 OF 2003
EVELYN MWAPASA FIRST APPLICANT
THOMAS FUNGULANI SECOND APPLICANT
STANBIC BANK LIMITED FIRST RESPONDENT
RAYMOND MELBOURNE DAVIES SECOND RESPONDENT
CORAM: DF MWAUNGULU (JUDGE)
Kapeta, Legal Practitioner, for the applicants
is an application for an interlocutory injunction. Mrs. Mwapasa, according to the applicants’
and respondents’ affidavits, is David Whitehead & Sons (
The application was initially ex parte. The application is drafted in a misleading manner, I must confess. It starts as a judicial review concerning the applicants. It then introduces Stanbic Bank Limited and Mr. Davies as respondents. The prayer suggests the application was within an action, Miscellaneous Civil Application number 97 of 2003. This application is however put as a new cause, Miscellaneous Civil Application number 110 of 2003. On this basis this Court granted the injunction ex parte on a certificate of urgency, ordered the applicants to file originating processes within four days and set the matter for fourteen days later for a hearing inter partes. The respondents, shortly after service of the injunctions, applied ex parte for discharge of the injunction. The respondents served the applicants with the ex parte application. The application came before this Court exactly the date the applicants should, according to this Court’s order, have filed the originating process.
The originating process was important, given the nature of the application before this Court before, to determine the action pretended against the respondents. The applicants, by the time of the hearing, had not lodged the originating process with the Court. Rather than hear the parties on discharge of the injunction, I ordered, with the consent of the parties, the proceedings to be inter partes for grant of an interlocutory injunction. The question before this Court is, therefore, whether, I should grant the interlocutory injunction in this matter. This presupposes the applicants contemplate an injunction action. The matter now is not, as Mr. Msisha, appearing for the respondents argues, whether this Court at the ex parte stage should have been more than or as perspicacious as it should be when hearing applications inter partes. Indeed on the very question on which Mr. Msisha submits this Court should have considered a threshold case for granting the ex parte injunction, namely locus standi, courts, except of course, in clear cases, rather than it prevent a court proceeding to determine the matter, defer the question to trial,.
Judges sitting at first instances know that in ordinary civil proceedings, the question whether an appropriate party is before the court, unless a party applies for removal or the court in its discretion takes it upon itself to act, is a matter at the trial. The position is not any different for judicial review proceedings where the court’s leave precedes commencement of proceedings. In Ex Parte Argyll Group  1 WLR 763 at 773 Lord Donaldson said:
“The first stage test, which is applied upon the application for leave, will lead to refusal if the applicant has no interest whatsoever and is, in truth, no more than a meddlesome busybody. If, however, an application appears otherwise to be arguable and there is no other discretionary bar, such as dilalatoriness on the part of the applicant, the applicant may expect to get leave to apply, leaving the test of interest or standing to be re-applied as a matter of discretion on the hearing of the substantive application. At this stage the strength of the applicant’s interest is one of the factors to be weighed in the balance.”
The Court of Appeal in Axa Equity and Life Assurance plc and others v National Westminster
Bank plc and others  EWCA Civ 782 (
The question for determination is, therefore, whether, on the facts, this Court should grant an interlocutory injunction against Stanbic Bank Limited’s appointment of a receiver under the debenture. A court, since American Cyanamid Co v Ethicon Ltd  1 All ER 504, may, where there is an issue for trial, on a balance of justice grant an interlocutory injunction to preserve the status quo before, through trial, it determines the rights between parties. There must be an issue of fact or law the court, without delving deeply in the evidence or consideration of the law, should determine. A court must at this stage avoid resolving complex legal questions appreciated through factual and legal issues only trial can afford and unravel. On the other, where the legal issue is clear and simple, the court should resolve it and refuse or allow the injunction. Such a course saves time and cost.
Between the employees and the debenture holder the court cannot, on any principle I know, entertain an employees’ injunction against the debenture holder’s right to appoint a receiver to realize her security. The shareholders, in this case Government through ADMARC Investment Holding Limited, or the company, could not on proof of default, prevent the debenture holder appointing a receiver under the debenture. The employees cannot. I base my conclusion on the dissenting judgment of Rigby, L.J. in Gosling v Gaskells  1 QB 669 at 692 where he said that for a valuable consideration the mortgagor, through a debenture, commits management to a receiver whose appointment he cannot interfere with:
“Lord Cranworth, in the case referred to, was speaking of a mortgage of lands; but the same doctrine apples to all kinds of property, being founder, as it is, not upon any considerations peculiar to the law of real property, but upon the contract between the debtor who gives and the creditor who takes the security. Of course the mortgagor cannot of his own will revoke the appointment of a receiver, or that appointment would be useless. For valuable consideration he has committed the management of his property to an attorney whose appointment he cannot interfere with. The appointment so made will stand good against himself and all persons claiming through him, except incumbrancers having priority to the mortgagee who appoints the receiver.”
The House of Lords in Gosling v Gaskells  AC 575 approved Lord Justice Rigby’s judgment.
In Shamji v Johnson Matthey Bankers  BCLC 36, Shamji’s group of companies owed around £21 million to the bank. Negotiations failed between the company and the bank to find finance to pay the debt. The bank appointed a receiver. Shamji applied for an injunction on the grounds that this was a breach of an agreement not to appoint and that the bank owed a duty of care to the plaintiffs not to appoint a receiver while they were actively seeking alternative finance. The Court of Appeals held that no such duty was held by the bank. The Court of Appeal approved Hoffman Jude’s judgment at first instance that, provided it did not act in bad faith, the bank owed no duty of care to the company in exercising rights to appoint a receiver under the charge. Shamji v Johnson Matthey Bankers is much like this case and cannot be distinguished from it.
In Downsview Nominee Ltd v First City Corporation Ltd  BCC 46, a very important decision on principles applying to debenture holders’ exercise of their powers, the Privy Council, on an appeal from New Zealand, held that a debenture holder can exercise his powers to appoint a receiver although the consequences disadvantage the borrower provided the debenture holder acts in good faith and minds her duty to subsequent encumbrancers and to the mortgagors to use the powers solely for purposes of securing money owed on the mortgage.
In my judgment, it matters less that under the Privatisation Act all government interests vest in the Privatisation Commission. Nothing in the Privatisation Act suggests different treatment from the Companies Act for Government as a shareholder in a company under the Companies Act. In this case moreover Government acts through ADMARC Investment holdings Ltd. The Companies Act and the general law prescribe to receivers, of course after appointment, duties and protections for employees. What the Companies Act and the general law do not do is to raise the position of employees vis-à-vis the appointment of a receiver by a debenture holder any higher or better than the shareholders or the company.
The point argued vehemently by Mr.
Kapeta, appearing for the applicants, is that Stanbic Bank Limited cannot act
on the debenture Government, as a shareholder, having promised paying and
actually paying part of the loan for David Whitehead & Sons (Malawi)
Limited. Mr. Kapeta invokes correspondence, undisputed by the bank, between the
bank and Government. Mr. Kapeta relies on a statement of Abbott CJ in Welby v Drake (1825) 1 C & P 557,
where, a creditor having sued a son after accepting half the sum from the
father in satisfaction of the debt, that, “… by suing the son he [the creditor]
commits fraud on the father, whom he induced to advance money on the faith of
such advance being a discharge of his son from further liability.” Similar reasoning appears in Cook v Lister (1863) 13 CB (N.S) 543 followed in Hiramchand Panamchand v
“Alternatively, it can be said that the court will not help a creditor to break a contract with a third party by allowing him to obtain a judgment against the debtor. On the contrary, it has been held that where a (the creditor) expressly contracts with B (the third party) not to sue C (the debtor) and A nevertheless sues, B can intervene as to obtain a stay of the action. This possibility would extend to the case where the consideration provided by B was a promise by B to pay A …”
The right to intervene based on the promise,
even by this passage, remains the contractor’s, not the debtor’s. The debtor,
David Whitehead & Sons (
discourse was to determine whether according to American Cyanamid Co v Ethicon Ltd there are issues between the
applicants, employees of the company, and Stanbic Bank Limited, the debenture
holder, and Mr. Davies, the receiver appointed, that ought to be tried to
justify the applicants the interlocutory relief. On the facts and law there are
no issues to be tried. The shareholders, Government and ADMARC investment
Holdings Limited, on proof of default of payment, could not prevent Stanbic
Bank Limited, the debenture holder, appointing a receiver. Government, not the
applicants, could intervene on behalf of David Whitehead & Sons (
applicants’ situation is not improved by suggesting David Whitehead & Sons
Kapeta further argues there ought to be an injunction against Stanbic Bank
Limited appointment of a receiver because the receiver’s appointment would
undermine the results of a judicial review where the applicants question
Government’s decision through the Privatisation Commission to sell David
Whitehead & Sons (Malawi) Limited at a certain price. Stanbic Bank Limited,
a debenture holder, naturally, is not part of those proceedings. Under
privatization, Government, as a shareholder, wants to sell its shares and
thereby affect ownership of David Whitehead & Sons (
course, if judicial review proceedings are successful Government could, under
the Privatisation Act, renegotiate the sale stalled by stay of proceedings and
an injunction in those proceedings. I do not think even that affects the rights
of Stanbic Bank Limited, the debenture holder to appoint a receiver. The
Receiver and Manager could sell the company. I do not think for once that the
Receiver Manager, given powers the law gives her (see Greenwood v Algeciras (Gibraltar) Railway  2 Ch 205; and Lathom v Greenwich Ferry (1895) 72 L.T.
790) and the duty, as a mortgagee to act in good faith (per Jenkins, LJ in Re B Johnson & Co (Builders) Ltd 
1 Ch 634 at 662), would operate in a way prejudicial to the interests of the
company or employees. The receiver manager has statutory obligations to
employees. The Receiver Manager could hive. Hiving, despite, stringent
formalities, affords more protection for employees. Unfortunately, in this
country we do not have the equivalent of The Transfer of Undertakings (Protection
of Employment) Regulations 1981,
I refuse the interlocutory injunction.
Made in Chambers this 15th Day of July 2003
D F Mwaungulu