Court claims Haunt govt

• Suppliers demand up to 7 000% interest
• Charges are beyond the imaginable—AG

What Government publicly declares is that it owes suppliers    K155 billion in arrears.

What it doesn’t say is that the owed business persons are dragging it to court one by one, demanding payment that the Attorney General (AG) has described as “beyond the imaginable”.

“There is a new menace that has hit government where suppliers are obtaining judgements from the courts,  demanding that government pays huge sums of money  and, using those judgements, claims of default are being made,” AG Charles Mhango said on Tuesday.

The AG said his office is inundated with court claims, with some companies demanding up to 7 000 percent in interest on default payments on goods supplied to the State.

Other firms actually convert the initial contract costs from kwacha to dollar and demand that government settle the payment at the current exchange rate, a development which Mhango described as “a menace that is more dangerous than Cashgate”.

He further said the court claims threaten the government purse as the State is forced to honour them and pay court costs as well.

The AG said government was heavily hit with many of such claims between 2012 and early 2015. But even today, new court claims are creating “a lot of problems for government”.

For example,   a supplier who charged government in kwacha terms in 2012 issued another invoice in 2018, calling it a devaluation invoice, where the charges are in dollars at the current exchange rate, plus interest.

“The supplier supplied K20 million worth of items in 2012 but now he is demanding K1.6 billion after re-issuing the invoice pegged in dollars,” Mhango said.”

He added; “The levels of interest charged are escalating beyond the imaginable.”

Another firm, Africa Commercial Agency, according to court records, sued government for   delaying    payment of K720.3 million for the supply of uniform and accessories to Immigration Department in 2009.

The company took government to court in January 2018 when the latter refused to pay K1.6 billion the company demanded after reissuing new invoices that included devaluation adjustments and 15 percent ‘legal collected costs’.

But the AG in his submission to the court said government denies liability for new invoices on the ground that all the prices were denominated in Malawi kwacha and not in United States dollars or any other foreign currency.

Reads in part AG’s submission: “The defendant further denies liability for interest at the bank rate plus 10 percent on the grounds that there was no agreement for interest nor the alleged bank rate plus 10 percent of interest in the contract.

“…and denies that the claimant is entitled to 15 percent legal collected costs as alleged on the grounds that in the event of success, the claimant would be entitled to party and party costs. The defendant denies each and every allegations of fact contained in the claimant’s statement of claim as if each were set forth and specifically traversed seriatim.”

In another case filed at the Commercial Court in Blantyre, Steels and Spares Supplies is claiming K492 million after delivering car accessories worth K6.6 million in 2012 to then Plant and Vehicle Hire Organisation (PVHO). The court has since ordered reassessment.

Details of the case show that the firm is claiming K6.6 million being money owed in respect of goods and services supplied and rendered and K9.6 million being interest on the principal money as at August 17 2012, further interest at five percent per month from August 18 2012 to the date of payment.

Interest from August 18 2012 to November 1 2015 was assessed at K68.3 million and further interest from November 1 2015 to May 18 2016 was assessed at K9.4 million. The two assessed sums of interest give a total of K84.4 million as being the sum still owed by the government.

In the ruling made by Justice Michael Mtambo on  January 24 2018, the court observed that the issues for determination were whether or not weight should be attached to the claimant’s calculations of interest, whether the claimant’s calculations of interest are correct, whether interest herein should be simple or compounded and the quantum of interest payable under the present proceedings.

“The claimant called one witness, in support of the assessment. His name is Gordon Nyirenda, an accountant working for the claimant. At the hearing of the assessment proceedings, he adopted his witness statement.

In the witness statement, Nyirenda stated that he had calculated further interest on the judgement sum from May 1 2016 to January 18 2018 and the total interest payable bringing the total sum payable to K492.8 million.

But government argued that Nyirenda does not work for any bank, he did not specify which commercial bank’s lending rate was used and that the claimant did not attach any communication from any bank on the applicable lending rates for the relevant period.

In his ruling, Mtambo said he found government’s contentions tenable.

“The fact that Gordon Nyirenda does not work for any commercial bank and the fact that no document on lending rates from any commercial bank was attached to his witness statement means that the veracity of the lending rates that were employed in interest calculations is completely unconfirmed. I so opine and find. Moreover, even the commercial bank whose lending rates were employed in the claimant’s calculations has not been mentioned. It is my finding, therefore, that no weight should be attached to the claimant’s present calculations of interest on the ground that the said calculations are based on unconfirmed bank lending rates.

“The plaintiff herein will have to re-do its calculations of interest, in line with the immediately foregoing finding which the assessment proceedings herein will have to be re-heard. Whether the claimant’s calculations of interest are correct, this issue has naturally fallen away, in view of the foregoing finding,” reads the ruling.

Mhango said the cited cases are a ‘tip of an iceberg’ as there are more cases haunting government.

“These claims are new menaces in government and what you are seeing is a tip of the iceberg. We have quite a few transactions which were not clear in my assessment. Some of the so called suppliers of services obtain judgments against government and most suppliers are on government’s neck. This is extremely sad,” he said.