MALAWI
IN THE HIGH
COURT OF MALAWI
PRINCIPAL
REGISTRY
CIVIL CAUSE NO.
1041 OF 2002
BETWEEN:
DIMON
(MALAWI) LIMITED.……………….......................... PLAINTIFF
-and-
MALAWI REVENUE
AUTHORITY.......……………................DEFENDANT
CORAM: THE HON.
MR. JUSTICE F.E. KAPANDA
Mbendera and Khondiwa of Counsel for the
Plaintiff
Kaphale and Chokotho of
Counsel for the Defendant
Jere, Court Clerk
Date of hearing: 2nd September 2004
Date of judgment: 8thOctober,
2004
_____________________________________________________
JUDGMENT
_____________________________________________________
Kapanda, J:
Introduction
This matter has been brought
before me for trial of four preliminary issues. The plaintiff had earlier on
wanted to obtain directions from the Registrar on almost similar issues. This
appears clearly from the Summons for Directions that was returnable before the
said Registrar on 19th March 2003. The plaintiff abandoned the said
application before the Registrar. It has now taken out the Notice of Motion
herein where it wants the four preliminary questions determined as preliminary
issues.
The Notice of Motion
As stated earlier, in the Motion
before me, the plaintiff is desirous of having a trial of preliminary issues.
The plaintiff wants the following four questions determined as preliminary
issues of law viz.
(a) The plaintiff having commenced these proceedings for the refund of monies wrongfully withheld by the defendant; and the defendant having now paid all such sums pursuant to the judgment of the Honourable Justice Nyirenda sitting at Lilongwe District Registry in Criminal Case No.242 of 2003, are the defences concerning the propriety of the plaintiff’s claim still available to the defendant?
(b)
Whether given the developments set out in the preceding paragraph and the
Honourable Judge in the criminal case having found that
“the
state (thereby referring to the defendant) has been vindictive; ignoring the
matter at the same time withholding substantial sums of money from the
accused…”
the matter comes within the purview of the
provisions of S. 154(2) or S.154(3) and (4) of the Customs & Excise Act
(Cap. 42:01 of the Laws of Malawi).
(c) Given the fundamental premises of criminal justice, that there is a
presumption of innocence until proven guilty, ought the defendant to be allowed
to impose a punishment without the sanction of the court? And given the finding
of the Judge in the criminal case as to mala fides of the State (thus
the defendant), do these issues bring the matter within S. 154(3) and S. 154(4)
of the Act, or do these issues still afford to the defendant the protection under
S. 154(2) of the Act?
(d) Should the resolution of the 3 preceding questions be that the
matter is removed from s. 154(2) of the Act and brought under s. 154(3) and (4)
of the Act, is it not obvious that the plaintiff should recover interest,
collection fees and costs from the defendant?
The course of action by the plaintiff, where it
wants a preliminary trial of the above-mentioned issues, has been taken out
pursuant to Order 33 rule 4 of the Rules of the Supreme Court.
Background: A narrative of the facts
The particulars of this case are to be discerned
from the Court Bundle that was filed with this court on 20th July
2004. I shall attempt, as far as practicable, to set out the facts in a
chronological order as I find them. The following are the facts:
January/February 2001: criminal
proceedings against the plaintiff
On 29th January 2001 the state
commenced criminal proceedings against the plaintiff. As a matter of fact, on
16th February 2001 it is when the state committed the plaintiff for
trial in the High Court. The criminal proceedings were registered in the
Lilongwe District Registry. The said proceedings were taken out at the instance
of the defendant. It was alleged by the state that the plaintiff had committed
fraud and evaded duty in the sum of MK 29,229,846.40 in respect of some
imported items. Moreover, there is no dispute that after the commencement of
the criminal proceedings the defendant withheld some excess “in put surtax”
refund that was payable to the plaintiff. The defendant advised the plaintiff
that the money was being withheld as security for the alleged evaded duty. The
sum of MK 39,935,035.12 was the total amount that was withheld as such
security.
The plaintiff was eventually
discharged from the criminal proceedings.
March 2002: legal action by the plaintiff and,
defence and counterclaim by the defendant
The plaintiff, on 20th March 2002, took
out a legal action against the defendant claiming the following relief from the
defendant:
(a)
A refund of the withheld excess “input surtax”
in the sum of MK 39,935,035.12
(b)
The sum of MK 55,753,841.94 by way of
interest at 3% above base lending rates from time to time applicable from 1st
October 1999 to 31st December 2002
(c)
In the alternative interest at such rate as
the court may direct from 1st October 1999 to 31st
December 2002
(d)
Further interest from 1st
January 2003 until payment
(e)
Collection fees (on the claimed refund and
interest)
(f)
Costs of the proceedings it commenced.
The defendant joined
issues with the plaintiff on the legal suit the latter commenced. Moreover, the
defendant put up a counterclaim.
The plaintiff then
eventually caused the matter to be set down for trial. This it did by filing
with the court a Bundle of Pleadings. There was trial date fixed for the
hearing of the civil action between the plaintiff and the defendant. The trial
of the action never took place on the appointed day of 28th June
2004. It would appear this was because of some event that happened sometime in
March 2004. The plaintiff literally abandoned the civil action and opted to go
through the criminal proceedings to get a refund of the withheld excess input
surtax. In point of fact, as will be seen shortly, the Lilongwe District
Registry ordered a refund of the said withheld surtax on an application for discharge
from the criminal proceedings.
March 2004: the plaintiff is discharged from the
criminal proceedings
The plaintiff applied
for an order that it be discharged from the charges that were preferred against
it and that an acquittal is entered in its favour. The plaintiff contended that
the state had failed to take steps to prosecute it speedily. In his ruling of
17th March 2004, Nyirenda,J. upheld the application by the plaintiff
and discharged it but never entered an acquittal as sought by the plaintiff[1].
Further, the court ordered that the money that was being withheld by the
defendant be released to the plaintiff. Arising from this order, the defendant
paid the plaintiff the sum of MK31, 000,000. In a letter dated the 8th
of April 2004 from the defendant to the plaintiff’s Legal Practitioners there
was a cheque enclosed therein where the defendant described the remittance to
the plaintiff as tax refund.
Recovery of costs of
criminal proceedings
The plaintiff made
yet another application following the one of discharge. This time around it was
an application for costs incurred in the criminal proceedings. In its ruling of 24th March 2004
for the said order of costs the court observed as follows:
“The accused seeks an order for costs owing to the reprehensive
conduct of the state in this action. I observe in the ruling discharging the
accused that the State has been vindictive; ignoring the matter at the same
time withholding substantial sums of money from the accused.
The accused pleaded with the State to have the matter concluded. The
state ignored the appeals. No doubt the accused has been put at expense over
the time.
It is only appropriate that I grant the prayer for costs by the accused
which I do.”[2]
This court has not
had the benefit of reading the record of the proceedings in the District
Registry so as to find out and acquaint itself with the facts that were put on
record. It will suffice to put it here that in the Ruling of the Court of 17th
March 2004 the Judge never said anything about the defendant being spiteful.
Indeed, this court is ignorant of the arguments that were made by the parties
during the application for discharge or the application for costs. Furthermore,
the Court Bundle filed herein does not contain any court process that was filed
with the District Registry on the application for discharge or costs incurred
in the criminal proceedings. It must be pointed out that the absence of the
record in the said criminal proceedings has a bearing on one of the issues to
be determined in the Motion before me.
June 2004: Motion for
trial of preliminary issues
I must observe that
although the plaintiff got a refund of the said withheld excess input surtax it
did not amend its pleadings. Instead, the plaintiff now wants some four
questions to be tried as preliminary issues of law. I have already set out the
said questions. For this reason, I will not repeat them here, but I will
proceed to consider the questions raised in the Notice of Motion.
Consideration
of the Issues raised in the Notice of Motion
I will now turn to
deal with the said four preliminary issuing in the Notice of Motion. However, I do not propose to set out the
said question as they are put in the Notice of Motion. In its place, this court will paraphrase and
shorten the said questions. I will then
proceed to determine the said shortened question trusting that my finding on
each of those questions will cover what the parties want determined.
Payment of the claimed refund: does it mean that the
defences raised by the defendant concerning the propriety of the plaintiff’s
claim are still available?
The plaintiff is of the view that
having obtained the refund of the said money that was being withheld by the
defendant then the only issue that remains to be determined is whether damages
(by way of interest), collection charges and costs are payable to it. As I see it, the first question in the
Notice of Motion requires this court to consider the effect of the order, of
Nyirenda J. requiring the defendant to refund the money that was withheld by
the defendant, on the civil proceedings in this Principal Registry. Put in another way the plaintiff wants this
court to determine whether, the defendant having paid all the monies it was
withholding, the defences raised by the defendant in this civil action are
still available to it.
As regards the essence of the defence
by the defendant the following is observed: it is the contention of the
defendant that the plaintiff did not suffer any loss or damage. The defendant further avers that the
plaintiff is only entitled to a refund without interest or damages. The
defendant moreover contends that, in terms of Section 154(2) of the Customs and
Excise Act, the plaintiff is not entitled to any costs. The said Section 154(2)
of the Customs and Excise Act provides as follows:
“ Where any proceedings are brought against the Controller (Commissioner
General) under the Customs laws and judgment is given against the Controller
(Commissioner General[3])
then, if the court before which such proceedings are heard is satisfied that
there were reasonable grounds for the action giving rise to the institution of the
proceedings, the plaintiff shall be entitled to recover anything
seized, or the value thereof, but shall not be otherwise be entitled to any
damages, and costs shall be awarded to either party.
Provided that this section shall not apply to any action brought in
accordance with Sections 20 and 174.” (emphasis supplied by me)
My
understanding of this section is that it will only apply where there are
proceedings taken against the Commissioner General and judgment is given
against him. In the instant case there
were neither such proceedings nor judgment given against the Commissioner
General or for that matter the defendant.
Assuming for the moment that the matter before Nyirenda J. were such
proceedings then one must still proceed to determine whether the order by Judge
Nyirenda would entitle the plaintiff to recover damages or costs. The reading of the abovementioned subsection
suggests to me that such damages or costs will only be awarded if the matter
comes within the provisions of Section 20 and Section 174 of the Customs and
Excise Act. What then does Sections 20
and 174 of the said Customs and Excise Act stipulate?
Section 20 of the Customs and Excise
Act states, inter alia, that damages will only be payable if there is physical
damage to property, goods or person or premises resulting from the exercise of
powers by a customs officer and/or an agent of the Commissioner General. In respect of such property, goods, person
or premises. The facts of this case, in
my opinion, do not come anywhere near the stipulation of the said Section 20 of
the Act. The complaint by the plaintiff is not about damage to its property or
goods or premises.
Further, the said
Section 174 stipulates, inter alia, that an action shall lie against the
Commissioner General (then called the Controller of Customs and Excise) for
damages to goods or additional expenses caused by the gross negligence or
willful misconduct of a customs officer in the handling, storage and
transportation of goods for the purposes of the customs laws. If the action is
successful damages or costs will be awarded, if there is loss or damage to
goods or additional expenses caused by the gross negligence or willful
misconduct of an officer acting or purporting to act in his official
capacity. Put simply, damages or costs
are only payable for loss or damage to goods if a customs officer is negligent
or has committed an act of willful misconduct in the performance of his/her
duties. The action by the plaintiff is
not premised on negligence or willful misconduct on the part of an officer of
the Malawi Revenue Authority. Thus, the
provisions of S. 174 of the said Customs and Excise cannot be called in aid by
any of the parties. Even if it were to
be assumed that there was such negligence or misconduct it must be said that
there is no evidence of damage suffered by the plaintiff by reason of the
withholding of the refund so as to entitle it to damages by way of interest.[4]
Moreover, a reading of Section 154(2)
clearly shows that the condition precedent to the application of this provision
is that there must be a judgment against the Commissioner General. There is no such judgment in the civil action
herein. It follows, therefore, that the
issue of damages (by way of interest) and costs cannot arise at this stage of
these proceedings.
Furthermore, as I understand it, no
damages and/or costs may be awarded where one obtains judgment against the Commissioner
General. As already seen the question
of damages or costs only comes in if a matter is within the provisions of
Sections 20 and 174 of the Act. This
court has already found that this matter is not one that comes within what is
stipulated in the said Sections 20 and 174 of the said Customs and Excise Act.
Further, I wish to observe that
despite the payment of the withheld excess input surtax the plaintiff has not
amended its claim for refund of the said input surtax. In the premises, I wonder whether the
plaintiff has properly abandoned its claim for the refund of the said excess in
put surtax. Further, I must agree with
Counsel for the defendant that the refund, which was made in the criminal
action, does not in any way affect the issues in the civil claim herein. The plaintiff’s claim, in the absence of a
certificate to that effect, has not been extinguished or abated.[5] Indeed, the view of this court is that it
cannot be properly be said that, after the said refund, the only issue that remains
to be determined is the issue of damages, interest and costs. As a matter fact the submission that the
plaintiff proposes to discontinue its claim or that its claim has purportedly
been satisfied does not mean that the only issues before the court are the ones
preliminary issues set out in the Notice of Motion. There is still outstanding the question whether the withholding
of the refund was proper, and also the matters raised in the counter claim. Moreover, the defendant’s counter claim has
not been discontinued or stayed. The
defendant’s intimation, by word of mouth, is not enough to discontinue its
counter claim. Furthermore, since there
is no judgment on the plaintiff’s claim it cannot be said that the counter
claim is no longer there for the counter claim is for all intents and purposes
an independent action. The counter claim has to be dealt with together with the
claim by the plaintiff. In addition, it is well to remember that the discharge
of the plaintiff did not have the effect of determining the rights of the
plaintiff and the defendant in the civil proceedings herein. The same is true
with the order requiring the defendant to refund the withheld excess input
surtax.
Consequently, the questions whether
the plaintiff owes the defendant surtax and whether the defendant was entitled
to withhold, the money the subject of the claim by the plaintiff, are still in
issue. Furthermore, notwithstanding the
refund the defences raised by the defendant are still available to the said
defendant. Indeed, whether the
plaintiff should get interest by way of damages is dependent on finding whether
the withholding of the refund was wrongful or not. In my judgment, no court has
determined the question whether or not the refund was properly withheld. It will
have to be decided at the trial of this action.
Are damages and costs recoverable in view of
Nyirenda’s observation that the defendant was vindictive?
As mentioned earlier, the observation
of Nyirenda, J. in his Ruling of 24th March 2004 that the defendant
was vindictive raises some interesting observations. Firstly, this court observed that there was no such finding of
vindictiveness, in the Ruling of 17th March 2004, on the part of the
defendant. In the absence of the record
of the proceedings before the judge can it be said that the court found as a
fact that there was vindictiveness on the part of the defendant? I am inclined
to agree with Counsel for the defendant that there is no evidence of the
defendant’s so called vindictiveness or mala fides. Further, this court accepts the contention by the defendant that
the question whether or not the state had been vindictive was not tried. Thus, the comment by Nyirenda J. that the
State (the defendant) had been vindictive, or that it acted in bad faith was
indeed made Obiter dictum. In saying
this I am alive to the fact that the Ruling of Justice Nyirenda, as observed
above, never tackled the issue of vindictiveness on the part of the defendant. Further, and in any event, I thought the
court actually imposed a sanction for the alleged vindictive behaviour on the
part of the defendant. Actually, the court ordered the defendant to pay costs
for such behaviour in the criminal proceedings before it. For this reason, the
plaintiff cannot be allowed to obtain compensation twice for the alleged
spiteful conduct on the part of the defendant. If anything, the defendant
should be made to pay for the alleged vindictive behviour once it is so found
by the court in the civil proceedings herein. But that can only happen after
full trial.
Moreover, I wish to
repeat the court’s earlier observation as follows: There is no judgment against the defendant in this matter which
would require awarding damages or costs to the plaintiff as they are commonly understood
or as envisaged by the provisions of Section 154 of the Customs and Excise
Act. Further, the order of refund of
surtax where the court made a passing remark on the conduct of the defendant
cannot be a ground for awarding damages or costs in the civil suit before this
court. Such damages or costs may only be awarded if a trial court finds as a
fact that same are warranted and allowed under the customs laws or any other
law.
Should the defendant be allowed to impose punishment
without the sanction of the court in light of the provisions of Section
42(2)(f)(iii) of the Constitution that provides for the right to be presumed
innocent until proven guilty?
This question calls upon this court to
apply and/or interpret the provisions of the Constitution as it relates to some
provisions of the Customs and Excise Act.
In my opinion this court, as presently constituted, is not the right
forum to determine such a question. A
proper forum would, in my view, be a court consisting of three judges of the
High Court.[6] The position
at law, as I understand it, is that any matter arising out of or relating to or
concerning the interpretation or application of the provisions of the
Constitution must be dealt with a panel of not less than three judges of the
High Court. Further, such a question would require that the State to be allowed
to lead evidence on[7] the question
set out in the motion.
In the event I am found to have been
wrong in thinking that this question would require the court to be
reconstituted, and that the State should be allowed to lead evidence, I will
still proceed to give my opinion on the question.
I must point out that it is not
correct that the powers exercised by the defendant when enforcing revenue laws
have the effect of imposing a punishment without the sanction of the
court. Indeed, the powers of seizure,
detention, embargo, forfeiture, imposition of a fine on settlement of cases and
a demand for payment of security, that the Commissioner General, or his
officers, exercises under the Act are not punishments as such[8]. The exercise of powers of seizure,
detention, embargo and imposition of a fine of settlement of cases and the
requirement of payment of security of duty evaded is intended to secure the
whole interest of the public and to protect revenue that would otherwise be
lost if such powers are not given to the defendant. In exercising these powers
it does not mean that the defendant or the Commissioner General is imposing a
punishment without the sanction of the court.
finding of malafides
: Is the defendant still protected by the provision of Section 154(2) of the
Act?
For staters, let it
be repeated here that there was no finding of fact by Nyirenda, J that the
defendant acted in bad faith. Further,
this court fails to see any mala fides on the part of the defendant. Actually, as already observed, the plaintiff
has not specifically pleaded mala fides in the civil proceedings before this
court.
Further, and in any event, this court
has demonstrated the statutory framework of the whole of Section 154 of the
said Customs and Excise Act. For
purposes of emphasis, if it is found by the court the defendant would be
protected by the provisions of Section 154 (2) of the Act. The defendant would only be liable to pay
costs if there is an action against it where the claimant is successful in
action in negligence or where the claim is that the defendant’s officer and/for
agents willfully misconducted themselves in the performance of their
duties. Further, such costs would be
awarded in a claim for damage to goods, property or person or premises.
The same principle
applies in respect of damages. Further
more, and as already found above, an award of costs or damages can only be made
where there is a judgment entered against the Commissioner General after the
court finds that there were reasonable grounds for bringing an action against
the Commissioner General. Therefore, I
wish to point out that the framing of question 3 was not properly done in so
far as the plaintiff wanted this court to determine if the provision of Section
154(4) of the Customs and Excise Act is applicable to the present case. Indeed,
section 154(4) of the Act is not applicable to the instant case. It would be prudent, for a better
understanding of what this subsection states, to quote it in extensio. The said
Section 154(4) provides as follows:
“where under the provisions of the Customs
laws any proceedings are brought by or against the controller (Commissioner
General) and
(a)
any sums or costs are recovered by the
Controller (the Commissioner General), such sums or costs shall be credited to
the revenue.
(b)
Any damages or costs are ordered to be paid by
the (the Commissioner General) Controller, such damages or costs shall be paid
out of the moneys appropriated for the administration of the Department (the
MRA) and the Controller (the Commissioner General) shall not be personally
liable therefor”
It must be realized
that the damages or costs being referred to in the above subsection are the
ones that are only to be awarded where a matter falls under the provisions of
sections 20 and Section 174 of the Customs and Excise Act. As discussed above, the occasions on which
award of such damages or costs would be made are limited. In the instant case there is no claim for
damages for damage to premises or goods or property. Further, there is no claim
for damages for negligence or willful misconduct on the part of the officers
and or agents of the Malawi Revenue Authority or the Commissioner General
himself. This is the case notwithstanding the alleged finding of mala fides in
the order of the court in the criminal action that was filed with the Lilongwe
District Registry. In any event, even
if there was such proper funding of mala fides, my understanding of the law is
that acting is bad faith is not the same as being negligent or committing an
act of wilful
misconduct. Further, I wish to agree with the argument of the defendant that
the comments of the court in the criminal proceeding to the effect that the
State was vindictive were made obiter. Moreover, it is to be remembered that
the plaintiff’s action is not premised on mala fides or vindictiveness on the
part of the defendant. As rightly pointed out by the defendant the issue of
mala fides ought to have been specifically pleaded and particularized. Further,
it is a common fact that the plaintiff was basically claiming a refund of money
and interest on the said withheld amounts of surtax. Since the issue of mala
fides was not so specifically pleaded or particularized this court cannot be
called upon to make a determination on payment of damages by way of interest
for the so called bad faith or vindictiveness on the part of the defendant.
This court must be guided by the pleadings of the parties even in cases of
trial of preliminary issues of law.
In sum, the provisions of Section 154(2) of the said Customs and Excise
Act would still protect the defendant. Of course
that protection can only be said with certainty if there is trial of the whole action herein and the
court so finds that the facts of this matter come within the stipulation in
Section 154(2) of the Act.
Is it obvious that the plaintiff should recover
interest collection fees and costs from the defendant?
It will have been observed that the first
three questions set out in the Notice of Motion have been answered in the
negative. Consequently, it is not
obvious that the plaintiff should recover interest, collection fees and costs
from the defendant. As regards the issue of collection charges I wish to make
the following observations:
The court
would like to point out that the prayer for collection fees has no basis in
law. Why do I say so? Firstly, the plaintiff commenced this action
on 20th March 2002. This was
after the Legal Practitioners (Scale and Minimum charges) (Amendment) Rules[9]
were promulgated. My understanding of
the law is that, in terms of these regulations governing collection fees, with
effect from 13th March 2002 legal collection charges are payable by
the collecting party and not the paying party[10]. Consequently, the collection fees ought to
be paid by the plaintiff to its legal practitioners and not the Defendant. Further, it is my understanding of the said
recent amendment that where proceedings are commenced, like in the instant
case, a Legal Practitioner may only charge solicitor and own client charges in
addition to party and party costs. Thus, since the plaintiff commenced a legal
action to collect withheld moneys the only costs that would be payable by the
Defendant would be party and party costs and not legal collection charges. Such costs would be taxed if they were found
to be payable pursuant to the aforementioned relevant sections of the Customs
and Excise Act.
Conclusion
The notice of motion
for trial of Preliminary issues is no successful and it is dismissed. It is
dismissed with costs. The matter must proceed to full trial on a date to be
fixed by the court.
Pronounced in Chambers this 8th day of October 2004 at
the Principal Registry, Blantyre.
F. E.
Kapanda
JUDGE