IN THE HIGH COURT OF MALAWI COMMERCIAL DIVISION BLANTYRE REGISTRY COMMERCIAL CASE NUMBER 165 OF 2016 NATIONAL BANK OF MALAWI LTD .................................................. PLAINTIFF VERSUS LILONGWE GAS COMPANY LTD ................................................... DEFENDANT CORAM: HON. JUSTICE J. N. KATSALA H. Mwangomba, of counsel for the plaintiff A. ·Kauka, of counsel for the defendant Makonyo, Court Clerk/Recording Officer JUDGMENT The plaintiff took out a writ of summons against the defendant claiming the sum of K31,424,072.42 being money advanced to the defendant by way of loan plus interest thereon "at the plaintiffs prevailing lending rate plus 10% penalty interest ... ". The defendant served a defence in which it admitted obtaining the loan but disputed that it is liable to pay penalty interest to the plaintiff. The defendant then took out a Notice of Motion under section 3 of the Loans Recovery Act and Order 7, rule 11 of the High Court (Commercial Division) Rules, 2007 seeking a declaration of this Court that it (the defendant) is not liable to pay to the plaintiff penalty interest or a sum of Kl4,500.00 for every default in instalments, as was claimed by the plaintiff. The facts of the case are brief, straight forward and agreed between the parties. By an agreement made on or about 2 January 2013 , the plaintiff advanced to the defendant by way of loan a sum of K9.1 million for the purpose of procurement of raw materials. It was agreed that the loan would attract interest at the rate of 5% above the plaintiff's base lending rate then at 35% per annum - making an effective rate of 40% per annum. This rate of interest was subject to change at the sole discretion of the plaintiff but any change would only come into effect upon its being 1 published in a newspaper within a reasonable time before the effective date. It was also agreed that the loan would be repaid in 12 equal monthly instalments of K931,629.47, and that the defendant would be liable to a penalty fee of K14,500.00 for default in the payment of an instalment. In terms of security for the loan, it was agreed that, among other things, the defendant would execute a surety charge in favour of the plaintiff over its property known as Title Number Bwaila 46712/263 which was valued at K54 million. The defendant failed to service the loan. The plaintiff then took out the present action to recover the loan amount plus interest. According to the plaintiffs calculations, as at 5 July 2016, the total amount due and owing stood at K31,424,072.42, the subject matter of this action. By the notice of motion, the defendant is urging the Court to reopen the transaction between the parties under section 3 of Loans Recovery Act with a view of ascertaining the true and rightful extent of the defendant's liability. The grounds advanced for this prayer are as follows. It says, as per the plaintiff's own admission, the sum of K31,424,072.42 claimed comprises of the principal plus penalty interest at 10% above the interest rate as originally agreed; that the clause in the parties agreement providing for additional interest, being "penalty interest", is not unenforceable; that such interest was not a genuine pre-estimate of the loss that the plaintiff would have suffered in the event of default by the defendant; the collateral stipulation imposed upon the defendant to pay additional interest in the event of default was a penalty and interrorem of the primary obligation to pay the principal and normal interest, and is therefore unenforceable; that a money lending transaction which places an obligation on a borrower to pay additional interest in cases of default is the type of transaction in relation to which a court of equity would give relief; and, that the clause in the parties' agreement providing for a penalty of KI4,500 every time there was a default in repayment, being a "penalty clause" is not enforceable. I received submissions and I have been referred to many decided cases the majority of which are from England and a few from Australia. Only one case, recently decided, is from Malawi. This shows that the issue before me has not been brought before our courts as often as it has been brought before the courts in other jurisdictions, especially in England. I must say, for clearance of doubt, that all the decisions I have been referred to are merely persuasive. There is none that is binding on this Court. Therefore, I have treated the cases as such when coming up with the decision in this judgment. At the hearing of the motion the plaintiff raised a preliminary issue relating to the admission of the affidavit of Mr Alinane Kauka, the defendant's counsel, which was filed in support of the notice of motion. It was argued that as counsel, Mr Kauka should not have sworn the affidavit since counsel cannot be both counsel and a witness in the same matter. The cases of Norse International v Group Five International Civil Cause No 2309 of 1995 (unreported) and The State v Speaker of National Assembly ex parte JZU Tembo Civil Cause No. 565 of 2009 (unreported) and Makwiti v Kaliwo [1992] 15 MLR 218 were cited in support of the argument. The Court was urged to disallow the affidavit and thus dismiss the present motion. The case of Makwiti v Kaliwo (supra) cited by the plaintiff in actual fact does not address the issue raised by the plaintiff. In that case, the appellant contended that the Registrar erred in accepting an affidavit sworn by counsel verifying facts in support of an application for summary judgment under Order 14 of the Rules of the Supreme Court. The appellant relied on the case of The Crown v Secretary of State for India [ 1941] 2 All ER 546 where it was held that a barrister should not act as counsel and witness in the same case. Makuta CJ held that the case relied on 2 was not applicable because it was decided before the changes allowing the use of an affidavit of any person including counsel to support an application for summary judgment were introduced into Order 14, rule 2(6) of the Rules of the Supreme Court. The present motion is made under Order 7, rule 11 of the High Court (Commercial Division) Rules, 2007 (hereafter "the Commercial Division Rules"). This rule is a replica of Order 14A, rule 1 of the Rules of the Supreme Court, save for rule 1(4). Under Order 14A an application can be by motion or summons. Where it is by summons it must be supported by affidavit evidence deposing to all the material facts relating to the question of law or construction to be determined by the court. The proceedings under this Order are not interlocutory proceedings since by its nature, the application will decide the rights of the parties and will terminate the action or otherwise finally dispose of it. (See Aubrey Likhusa and others v Reunion Insurance Co Ltd [2013] MLR 4). Therefore, the affidavits for use in proceedings under Order 14A may depose only to such facts as the deponent is able of his own knowledge to prove. (See Order 41 , rule 5 of the Rules of the Supreme Court). In my judgment, since Order 7, rule 11 is in pari materia with Order 14A, rule 1 of the Rules of the Supreme Court, it is these same principles which are also applicable on an application under Order 7, rule 11 of the Commercial Division Rules. In that respect, I would agree with the plaintiff that the principle in the cases of Norse International v Group Five International (supra) and The State v Speaker of National Assembly ex parte JZU Tembo (supra) are applicable to an application under this Order 7, rule 11. In his affidavit in support of the motion Mr Alinane Kauka states that "all matters of fact to which I depose in this affidavit have been passed on to me by the defendant's Managing Director, Lugano Mwalwanda, and I verily believe all such facts to be true". Clearly, Mr Kauka has not deposed to facts as he is able of his own knowledge to prove. He has deposed to facts obtained from another person, Lugano Mwalwanda. Therefore, this affidavit would not be admissible to support an application by summons under Order 14A, rule 1 of the Rules of the Supreme Court. In the same vein, it would not be admissible to support an application by summons under Order 7, rule 11 of the Commercial Division Rules. However, that is not the end of the matter. The defendant took out a notice of motion. In my view, looking at the notice of motion and the pleadings filed by the parties, the affidavit of Mr Alinane Kauka was not necessary. It is very brief and basically repeats what is stated in the notice of motion and the defence. Further, the affidavit filed by the plaintiff also repeats what is stated in the affidavit of Mr Kauka. The relevant documents pertaining to the matter were attached to the writ of summons by the plaintiff when commencing the action. In the circumstances, it is my judgment that striking down the affidavit would not be fatal to the present application. Practice Note 14Nl-2/8 in the Rules of the Supreme Court states that where the application is made by summons it must be supported by an affidavit deposing to all the material facts relating to the questions of law or construction to be determined by the court.