The High Court’s Commercial Division sitting in Blantyre has rejected a Simama General Dealers’ application to dismiss a case in which Illovo Sugar Malawi is demanding USD 319 608 (about K324 million) from the company.
Justice John Katsala dismissed the application with costs.
In 2012, the two companies entered into a tenancy agreement in respect of the warehouse in Karonga under which it was agreed that Illovo would pay a rental fee of USD3, 00 per square meter, which Simama represented that the warehouse had 4000 square metres in size.
Illovo proceeded to pay the rentals on that basis.
However, after some time and having already made a number of payments, it was discovered that the actual size was 1149.01 square metres.
Illovo then proceeded to demand from Simama a refund of USD 319 608 being the amount of money paid in respect of the excess 2850 square metres.
Further, Illovo demanded compound interest at a rate of 3 percent above the base lending rate from April 2012 to date of payment, debt collection charges and costs.
Simama refused to pay which forced Illovo to seek legal redress.
Through an affidavit, Simama General Dealers owner and Chairman, Bishop Abraham Simama said Illovo is seeking to enforce an illegal contract because the tenancy agreement entered into between the parties in respect of a warehouse contravenes Regulation 2(a) of the Exchange Control (Use of Foreign Currencies in Local Transactions) Regulations.
The regulation prohibits the quotation or the acceptance of quotation of prices in foreign currency.
Simama argued that it’s agreement with the claimant was to let out the warehouse at a rental of K1.8 million per month, they never misrepresented it’s size and never received excess sums.
He further said the addendum was executed on the basis that Illovo now required less warehouse space and not as a correction of the actual size.
In opposition, Illovo Warehouse Manager Anthony Mwakanena argued that the use of the United States Dollars was strictly for purposes of indexing.
“True to this arrangement all the invoices issues by the defendant itself demanding payment were in Malawi Kwacha and we’re an expression of the Malawi Kwacha equivalent of what was payable,” said Mwakanena in his affidavit
In his ruling, Justice Katsala said though the agreement showed that rental fee was agreed to be USD3.00 per square meter, evidence showed that all invoices the defendant issued to the claimant demanding rentals were in Malawi Kwacha (K1.8 million per month).
“No invoice has been brought to my attention in which payment was demanded in United States Dollars. The evidence shows that all the payments were made in Malawi Kwacha. The question is, does this amount to a breach of the Regulation?
“”A reading of the Regulations reveals that the purport of the Regulations is the control of the use of foreign currency in local transactions, and by implication, the enforcement of the Malawi Kwacha as the only legal tender in Malawi. In my judgement, for the Regulation to be breached, there must be an intention to pay or demand payment in foreign currency. So, where the parties do not intend to make payment or to demand payment in foreign currency, I do not see how they can be said to have breached the Regulation,” reads part of the ruling delivered on December 24, 2022
The Judge noted that Illovo argued that “by it’s letter dated 6th March, 2012, Simama accepted Illovo’s offer to rent his property in Malawi Kwacha, K1.8 million per month”.
He therefore refused to dismiss the case based on affidavit evidence and ordered for a full trial.