Illovo demanding half a billion from Simama



Illovo Sugar Malawi is demanding close to half a billion Malawi Kwacha from Simama General Dealers which is led by businessperson Bishop Abraham Simama.

Simama General Dealers could lose over K330 million plus interest  as the High Court’s Commercial Division sitting in Blantyre on December 24 last year refused to dismiss a case in which Illovo wants to recover money paid to Simama General Dealers.

Illovo took the matter to the High Court after Simama refused to pay the demanded amount.

According to a 24 December, 2022 court ruling Malawi24 has seen, Simama General Dealers owns  a warehouse in Karonga and in 2012, Illovo and Simama entered into a tenancy agreement under which it was agreed that Illovo would pay a rental fee of USD3.00 per square meter.

However, after some time and having already made a number of payments, Illovo discovered that the actual size of the warehouse was 1149.01 square metres and not 4000 square metres in size as allegedly claimed by Simama.

In 2017, the two parties added a section in the contract to indicate that the size of the  warehouse  is 1149.01 square metres.   

Illovo then proceeded to demand from Simama a refund of USD319, 608 (about K330 million) being the amount of money paid in respect of the excess 2850 square metres.

When Simama refused to pay back, Illovo proceeded to court where the company is demanding from Simama a refund of the USD319,608.

Illovo further is demanding compound interest at a rate of 3 percent above the base lending rate from April 2012 to date as well as debt collection charges and costs, which could take the total amount to about K500 million.

However, Simama also filed its own application in the case asking the court to dismiss the case, saying the agreement was to let out the warehouse at a rental of K1.8 million per month and the company never misrepresented its size and never received excess sums.

Simama 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.

Simama also described the tenancy agreement as illegal because Regulation 2(a) of the Exchange Control (Use of Foreign Currencies in Local Transactions) Regulations prohibits quotation or acceptance of quotation of prices in foreign currency.

In his ruling, High Court Judge John Katsala noted that the the agreement showed that rental fee was agreed to be USD3.00 per square meter but all invoices Simama issued to Illovo  were  in Malawi Kwacha and all payments Illovo made to Simama were also in Malawi Kwacha.

”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.

Katsala then threw out the application  by Simama with costs, saying the matter cannot be determined on a point of law. According to the judge, there are factual issues in the case which can only determined upon  conducting a full trial.

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