This case concerned an application by Mr Chiotha to set aside the appointment by the court of a receiver over his assets following his failure to satisfy a judgment debt. The Malawian court held that technical deficiencies in the appointment did not invalidate it.
Malawian law bears many similarities to the law in England and Wales and authorities from this jurisdiction were cited in this case. However, while the decision of the Malawian court will be of interest to practitioners in this jurisdiction, it has no weight here.
Background
Diab Dairy Farming Limited (Diab) obtained a money judgment against Billy Chiotha t/a Innobuild Limited (Mr Chiotha) in the Malawian court and later served a statutory demand on Mr Chiotha. Subsequently, the court granted Diab's application for the appointment of a receiver (the Receiver) (the Receivership Application), which was made without notice to Mr Chiotha. It was made pursuant to Order 28 rule 29(1)(d) of the Courts (High Court) (Civil Procedure) Rules 2019 (the Malawian CPR).
Shortly after his appointment, the Receiver published a notice (the Receivership Notice) in a national newspaper, stating that it was published pursuant to section 79 of the Malawian Insolvency Act (the Malawian Insolvency Act). Mr Chiotha applied to stay the enforcement of the order appointing the Receiver pending his application to set it aside.
The parties' arguments and the court's decision
Mr Chiotha argued that Diab ought to have made the Receivership Application on notice to him, a requirement of the Malawian Insolvency Act if a Receivership Application is made under that Act. Mr Chiotha further claimed that this requirement superseded Order 28 rule 30, which allows for applications without notice to the debtor.
In response, Diab contended that, despite the reference to the Malawian Insolvency Act in the Receivership Notice, the Receivership Application was, in fact, made under Order 28 rule 29 of the Malawian CPR, which deals with equitable execution of money judgments. It cited authorities in England and Wales in support of this proposition. Diab submitted that this was distinct from an appointment under section 75 of the Malawian Insolvency Act. Diab acknowledged that the Receivership Notice inadvertently referred to the Malawian Insolvency Act when it should have referred to Order 28 rule 29 of the Malawian CPR. It submitted that Mr Chiotha was attempting to evade his debt obligations through procedural technicalities.
Ultimately, the court found that the Receivership Application was correctly made without notice to Mr Chiotha. Order 28 rule 33 of the Malawian CPR provides that a receiver may apply to court for directions to assist in performing their functions. This, the court noted, suggested that a receiver appointed under Order 28 rule 29 of the Malawian CPR should not refer to the Malawian Insolvency Act. The court accepted Diab's argument, confirming that Order 28 rule 29 of the Malawian CPR pertains to equitable enforcement of a judgment and is distinct from the Malawian Insolvency Act. This conclusion was further supported by Order 28 rule 2(1) of the Malawian CPR, which permits enforcement of a judgment by various means including receivership. However, the court did not explain its reasoning in detail.
The court held that the erroneous reference to the Malawian Insolvency Act in the Receivership Notice was curable and did not invalidate the Receiver’s appointment. It directed the Receiver to follow the procedure under the Malawian CPR rather than the Malawian Insolvency Act, as the two were different regimes. The Set Aside Application was dismissed, and the stay on enforcement was lifted.
Analysis and Commentary
The case highlights Malawian courts' willingness to enforce judgment debts through receivership appointments. It also signals that Malawian courts may overlook technical challenges to the appointment of a receiver, even if errors were made. Nevertheless, the court missed an opportunity to address and clarify two key points that could be useful for officeholders, debtors and creditors: (1) the distinctions between the appointment of a receiver under Order 28 rule 29 of the Malawian CPR and section 75 of the Malawian Insolvency Act; and (2) the circumstances in which a court will entertain an application for the appointment of a receiver without notice to the debtor. Each point is discussed below.
Distinctions between receivership under the Malawian CPR and Malawian Insolvency Act
There are three main differences between appointing a receiver under Order 28 rule 29 of the Malawian CPR and under section 75 of the Malawian Insolvency Act:
- Purpose: Appointing a receiver under Order 28 rule 29 is intended primarily as an equitable enforcement mechanism. This allows creditors to secure payment of a judgment debt by temporarily managing the debtor’s assets. Under the Malawian Insolvency Act, however, a receiver is appointed to manage assets for secured creditors, often in preparation for distributing proceeds to satisfy secured debts.
- Triggering factors: A creditor must hold a money judgment to apply for the appointment of a receiver under the Malawian CPR, whereas section 75 of the Malawian Insolvency Act applies where a secured creditor seeks to enforce security rights following a debtor's default of a secured obligation.
- Statutory basis and authority: The court's jurisdiction to appoint a receiver for the equitable enforcement of a judgment is derived from section 11(a)(iv) of the Courts Act 1958 (the Malawian Courts Act), while sections 75 and 78 of the Malawian Insolvency Act provide authority for appointing a receiver as part of a secured creditor's rights.
Notice requirement for receivership applications
While Order 28 rule 29 of the Malawian CPR allows applications without notice to the debtor, this is not automatic. Order 28 rule 29 of the Malawian CPR mirrors our Part 69 of the Civil Procedure Rules (Courts powers to appoint a receiver), and section 11(a)(iv) of the Malawian Courts Act is similar to our section 37 of the Senior Courts Act 1981 (Powers of High Court in respect of injunctions and receivers). As such, England and Wales case law on this subject is persuasive in Malawian courts. Courts in England and Wales generally allow applications without notice only when prior notice may defeat the application's purpose – such as in cases of fraud or where there is a risk of the debtor being "tipped off" and thus taking steps to frustrate any order. In such cases, applicants have a duty of full and frank disclosure at any ex parte hearing.
Conclusion and takeaways
This case illustrates the Malawian courts' commitment to using all available tools, including equitable enforcement, to support judgment creditors. However, in our view, the court did not go far enough to clarify the distinctions between receivers appointed under section 11(a)(iv) of the Malawian Courts Act and section 75 of the Malawian Insolvency Act, or the factors guiding without-notice receivership applications. Clearer guidance on these key issues would benefit officeholders and creditors in selecting appropriate enforcement mechanisms and preparing equitable enforcement applications.
There are three key takeaways from this case:
- Choose the right basis for receivership applications: To avoid procedural pitfalls, creditors should first confirm whether their receivership application is grounded in equitable enforcement under the Malawian Courts Act or in enforcement of security under the Malawian Insolvency Act. As seen here, any missteps in referencing the appropriate statutory basis may lead to avoidable challenges. However, minor technical errors, at least in the Malawian courts, might not invalidate the appointment if the court considers them inconsequential.
- Consider notice requirements carefully: When planning an application, creditors should note that although Order 28 of the Malawian CPR permits without-notice applications, these should be made cautiously. Typically, without-notice applications are reserved for situations where advance notice could undermine the purpose, such as where there is a risk the debtor might dissipate assets. It is advisable to be prepared to justify this approach with clear reasons to avoid potential setbacks.
- Leverage English case law where relevant: Given that Malawian courts often treat case law in England and Wales as persuasive authority, particularly in areas where Malawian law mirrors England and Wales law, creditors should consider these relevant precedents. This can be invaluable in guiding enforcement actions, especially in situations where Malawian jurisprudence lacks comprehensive guidance on equitable enforcement.
