Diab Diary Farming Limited v Chiotha t/a Innobuild Limited (Commercial Case 6 of 2023) [2024] MWCommC 4 (5 July 2024)

IN THE HIGH COURT OF MALAWI (COMMERCIAL DIVISION) LILONGWE REGISTRY COMMERCIAL CASE NO. 6 OF 2023 BETWEEN: DIAB DAIRY FARMING LIMITED. ......... 0... ccssssssseetsseseseteneseeeneeees OC LATMANT BILLY JONATHAN CHIOTHA t/a oo... cccccceeneeeeeceneeeeeeeesenerteeee DEFENDANT _ tla INNOBUILD LIMITED CORAM: HON. JUSTICE GLORIA ALINAFE NAMONDE Chilenga, of Counsel for the Claimant, Kita, of Counsel for the Defendant, Ms. Makalani, Court Clerk. RULING 1. On 22"4 May, 2024, this Court granted the Claimant’s application for appointment of a receiver under Order 28 rule 29 (1) (d) of the Courts (High Court) (Civil Procedure) Rules, 2017, (the CPR). The application was made without notice. 2; On26" June, 2024, Kita & Company filed a notice that it had been appointed as additional legal practitioners in this matter, besides Messrs. Roberts & Franklin Law Consultants. On the same date, the Defendant files a without notice application for suspension of enforcement of the Order of appointment of Receiver made under Order 28 rule 48 of the 1 CPR. I directed that the application should come by way of notice on 5" July, 2024 at 8:30 a.m. 3. The grounds for the application were as follows: a. b. Application for appointment of receiver was never served on the Defendant and yet section 78(1) of the Insolvency Act requires that the debtor be served with process. Event though, under the CPR the application can be made without notice, it needs to be recognized that an Act of Parliament or statute stands superior to rules of procedure or subsidiary legislation. The Case of Jam Willem Akster v The State & Centre for Human Rights, Education and Assistance, Constitutional Referral No.2 of 2021 was cited as authority. The statutory demand being exhibit MC 1, was never served personally despite rules 158 (1)(f) and 2 of the Insolvency Rules requiring that a Statutory Demand ought to be served personally, and if not, it needs to state that the one being served is authorized by the debtor. The sworn statement in opposition to the application was defective as it was not compliant to Order 18 rule 5 (e) of the CPR 4. In response, the Claimant argued that the application is misconceived as a. Order 28 rule 2 (1) of the CPR provides for different modes of enforcement, one of which is the appointment of a receiver. With respect to the argument on statutory demand, this was complied with as it was served on the Defendant’s authorized legal practitioners. Besides, the statutory demand was obtained in November 2023. The Claimant wondered why it was being brought today. the requirement of notice was not necessary under Order 28 rules 2 and 29 (1)(d) of the CPR. The insolvency rules cannot apply in enforcement of judgment but in pure insolvency proceedings. The receiver in enforcement of judgment will be discharged once a debt has been recovered. The Defendant is using insolvency laws to evade payment of a debt. Counsel only agreed on the defect of his sworn statement after the Court pointed out to him the stipulations under Order 18 rule 7 (5)(e) of the CPR. 5. The issue before be is whether to grant the application or not. 6. 10. Starting with the issue of the sworn statement, the observation made by the Defendant is accurate. The ending of the sworn statement was not compliant with Order 18 rule 7(5)(e) of the CPR in that the sworn statement did not include the deponent’s full name, address and capacity to take the sworn statement. However, it was noted that the Defendant extensively referred to it throughout its written as well as oral submission. In addition, Claimant invoked Order 18 rule 18. Taking into consideration all the submissions, and being mindful of Order 2 in general, and seeing that the Claimant was not prejudiced in any way, I resolved to consider the contents of the Claimant’s sworn statement in coming up with this ruling. With respect to the question of the statutory demand, indeed, it is the Claimant who first referred to the statutory demand in its sworn statement arguing that it sufficed as bankruptcy and insolvency notice relating to the proceedings. The Defendant was drawn to respond to the same. It cannot therefore be argued that the Defendant never challenged the statutory demand after it had been issued. It is true that the application for the appointment of the receiver was made under Order 28 rule 29(d) of the CPR. The rule provides that ‘the Court may appoint a receiver on or after judgment.’ Rule 30 of the same Order states that ‘an application for the appointment of the receiver may be made without notice and shall be supported by written evidence.’ This is what the Claimant did in these proceedings. Later, the Claimant caused to be published in one of the local newspapers notifications of Mr. Isaac Kayira as receiver for the assets of the Defendant. The publication went on to state that the appointment was in terms of Order 28 rule 29 of the CPR. However, the heading of the publication had cited in brackets, Insolvency Act, section 79. The impression given is that the publication was being done in accordance or in terms with the provisions of section 79 (1) (a) of the Insolvency Act. Thus, the provisions thereunder ought to have been complied with. The section provides that ‘a receiver shall, within the prescribed period after being appointed give written notice of his appointment to the debtor’ It is clear therefore, that the receiver is bound to notify the debtor, in this case the Defendant within a specified period of his appointment. No evidence was adduced before me to show that the Defendant had been notified of the appointment of receiver prior to the publication in the newspapers. Seeing how the publication has been couched, it can be seen why the [t. 12, 15. 14, 13. law requires the receiver to notify the debtor first. The publication states, “following this appointment, all those persons in possession of assets, chattels, and other debts due to the company should forthwith pay to me within fourteen days of this publication. All those creditors of the company should submit details of their claim including full contact addresses and with full proof of indebtedness to the address below so that they may be included in the company’s state of affairs by 28" June, 2024.” As the Statutory Demand was issued in November, 2023, and the order of appointment of receiver was only granted in May 2024, it cannot be argued that the Statutory Demand sufficed as notice of the appointment of Mr. Isaac Kayira as receiver. It was only notice of the status of the Defendant in the eyes of the Claimant. Coming to the application for the appointment of the receiver, it was made under Order 28 rule 29 of the CPR. Under this provision, an application to appoint a receiver can be made without notice. However, there is also section 78 of the Insolvency Act that needs to be considered. Section 78 (1) “The Court may appoint a receiver, or a receiver and manager, on the application of a secured party or of any other person and on notice to the company, where the Court is satisfied that—" It is clear from the evidence that the Claimant had sued the Defendant that is trading as a limited company. Accordingly, the provision herein ought to have exercised the mind of Counsel at the time he made the application for the appointment of the receiver. Thus, the application could have been couched by incorporating the two provisions, namely Order 28 rule 29(1)(d) as read with section 78 of the (1) of the Insolvency Act. With respect to Order 28 rule 30, it is obvious that it contradicts section 78 (1) of the Insolvency Act. This Court subscribes to the view held in the cited case of Jam Willem Akster v The State and Centre for Human Rights, Education, Advice and Assistance, (supra), stating that, ‘This Court does not believe that a subsidiary legislation can amend an Act or Acts. Where there is a conflict between an Act, such as the Oath, Affirmations and Declarations Act and subsidiary legislation, in this case, the Civil Procedure Rules, the Act takes precedence...’ Thus, in the same vein, section 78 (1) of the Insolvency Act prevails over Order 28 rule 30 of the CPR, meaning the application for receiver ought to have come by way of notice. 16. The application for an Order suspending the enforcement of the Order of Appointment of Receiver is therefore granted. 17. It is further directed that the application to set aside the Order of Appointment of Receiver should come by way of notice on 11" July, 2024 at 8:30 hours in the fore-noon. 18. Costs shall be in the cause. Pronounced in open court this 5" day of July, 2024. Gloria f ee JUDGE