margareth lothar roland purucker vs lothar roland purucker another 2023 tzhccomd 26 17 february 2023

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (COMMERCIAL DIVISION)

AT DAR ES SALAAM MISC. COMMERCIAL APPLICATION NO. 20 OF 2022 IN THE MATTER OF THE COMPANIES ACT NO. 12 OF 2002 (CAP 212 OF 2002)

AND IN THE MATTER OF ELECTRICAL EQUIPMENT ASSEMBLY AND

COMPANY LTD AND IN THE MATTER OF APPLICATION BY: MARGARETH LOTHAR ROLAND PURUCKER ….…… PETITIONER

VERSUS LOTHAR ROLAND PURUCKER……………………1ST RESPONDENT

ELECTRICAL EQUIPMENT ASSEMBLY AND COMPANY LTD………………………….……...2ND RESPONENT

RULING Date of last order:01/12/2022 Date of ruling:17/02/2023 AGATHO, J.: The Petitioner, MARGARETH LOTHAR ROLAND PURUCKER under the provisions of Section 233(1) (2) (3), Section 182 (1) Section 121(1) (2) (3) Section 137(1) (2) (3), Article 26,27, 28 of table A of 1st Schedule to the Companies Act, Act No 12 of 2002, Section 68, and 95 of the Civil Procedure code (Cap 33 R.E. 2019) and any other enabling provisions of the law, instituted the instant petition against the above-named Respondents praying this court to grant the following orders: (a) Declarations that the affairs of the 2nd Respondent Company are run in a manner prejudicial to the interests of the Members, Petitioner and a company itself; 1 (b) The Court be pleased to appoint an independent and qualified auditor(s) to audit the current financial affairs of the 2nd Respondent and establish the current value of the 2nd Respondent. (c) An order for the 1st Respondent to pay the Petitioner sum total of USD 48,576 being part of her rental shares that the 1st Respondent has received from Bati Services Limited; and (d) An order for an immediate meeting of shareholders as required by the law to discuss affairs of the company. (e) An order compelling the Respondents, jointly and severally, to pay the Petitioner a sum total of USD 600,000 being the value of her paid up shares that the Petitioner owns in the 2nd Respondent

company. (f) Failure by the Respondents, jointly and severally to heed to the prayers in (e) above, an order for the Petitioner to be permitted to offer and sell her paid up shares to outsiders at the current market value. (g) Costs of the petition. (h) Any other order or relief the Court will deem fit, just, and equitable to grant to enable smooth and proper running of the 2nd Respondent business affairs in the protection of interest of the company and the Petitioner. Upon being served with the petition the respondents filed a joint reply to the petition and simultaneously raised preliminary objections on point of law to the effect that: (1) That the petition is time barred. (2) That the petition is incompetent for not been sanctioned by board resolution. 2 Before analysing the rival submissions of the parties on the Preliminary Objections, it is worthy sketching the background of the petition albeit briefly. The Petitioner and 1st Respondents were spouses. In 1984 they incorporated the 2nd Respondent company. It was stated that sometimes in 2005 the 1st Respondent rented the property belonging to the 2nd Respondent to Bati Service Limited the properties acquired between the petitioner and 1st Respondent. The lease agreement was executed between the petitioner, 1st respondent and Bati Service Limited. It was express in the said lease agreement that the rental fee for the

demise premise would be USD 1,000 per month renewable or revised annually with rent increase of 10% annually. It was a common understanding of the parties that the rent received was to be shared between Petitioner and the 1st Respondent. It is alleged that the 1st Respondent excluded the Petitioner in the operations of the 2nd Respondent and even profits generated from the company including the rents received from Bati Service Limited. Following the exclusion and non-sharing of the rent, the petitioner in her petition is claiming for USD 48, 576 from the 1st Respondent as her rental shares that the 1st Respondent received from Bati Service Limited and the same, she also claims that there is unfair prejudice as she is excluded from managing the affairs of the 2nd Respondent and that since 1992 the affair of the 2 nd Respondent running contrary to the law. As hinted herein above the Respondents raised the preliminary objections hence this ruling. I ordered the preliminary objections to be disposed by way of written submissions. In support of preliminary objection, the learned counsel for Respondent abandoned the second ground of objection. They remained with a key preliminary objection, that the petition is time barred. Submitting on the first fold, the learned counsel for 3 Respondents submitted that limitation applies to all matters of a civil nature and the relationship

between shareholders and directors is contractual unless appointed by the operation of law. On the other hand, the learned counsel for Petitioner has submitted that, all what has been submitted by the Respondents are not pure point of law because it requires the ascertainment of facts, scrutiny of the petition and answer to the petition. To cement his submission, he referred this court to the case of Jackline Hamson Ghikas v Mllatie Richie Assey, Civil Application No. 656/01 of 2021 CAT at DSM. In which the Court held that, preliminary objection must satisfy three conditions: point of law must be pleaded, it must be pure point of law which do not require close examination or scrutiny of the evidence. It should be noted that the objection on period of limitation, that a matter being time barred touches upon the jurisdiction of the court. Its determination does not require the ascertainment of facts or evidence. To determine such an objection, the court only needs to look into the petition and its annexures without further facts or evidence to be ascertained in determining whether the petition is time barred. See the case of Ali Shaban and 48 Others v Tanzania National Roads Agency and Attorney General, Civil Appeal No. 261 of 2020, where the Court of Appeal faced akin situation to the one at hand, at page 8 of its judgement it stated that: “It is clear that an objection as it

were on account of time bar is one of the preliminary objections which courts have held based on pure point of law whose determination does not require ascertainment of facts or evidence. At any rate, we hold the view that no preliminary objection will be taken from the abstract without reference to some 4 facts plain on the pleadings which must be looked at without examination of any evidence.” Guided by the above principle it is my considered opinion that the so raised preliminary objection is pure point of law, it is drawn from the pleadings and no evidence is needed to substantiate it. I am of the view that it is a point of law matching the requirements set in Mukisa Biscuits Manufacturing Ltd v West End Distributors Ltd [1969] E.A.

696. And the case of Jackline Hamson Ghikas (supra) cited by the learned counsel for Petitioner is distinguished from the case at hand because it was dealing with proof of service which requires evidence and hence cannot be preliminary objection based on pure point of law. Turning to the second fold of the preliminary objection, the learned counsel for Respondents has submitted that, the suit is time barred as the course of action is found on contract as a such the Petitioner was supposed to institute his claim within 6 years from the date when breach occurred because the relationship that exist between the parties is a contractual and therefore time limit is 6 years as per the Law of Limitation Act. On the other hand, the learned counsel for Petitioner submitted that, the Respondents have failed to grasp that the present petition is not a normal breach of contract but continuous breach of contract, when the Respondents started to refuse to cooperate with the petitioner, executed the lease agreement on 24/5/2006 by the 1st Respondent without consulting the Petitioner and subsequently, receiving rents without sharing with the Petitioner as a such breach is continuous breach up to 15th May, 2022 has been obtaining rentals. He went on submitting that if breach is 5 continuing, Section 7 of the Law of Limitation Act [Cap 89 R.E. 2019] come to play. To cement his position the

learned counsel referred this court to the case of Lindi Express Ltd v Infinite Estate Ltd, Commercial Case No 17 of 2021 HCCD at pages 8 -12. And the case of Josephat Muniko s/o Mwita Mkindya & Another v North Mara Gold Mine Ltd, Commercial Case No. 9 of 2019 in which the Court held that in continuing breach, Section 3 and Section 7 of the Law of Limitation Act must be read together. At this juncture, the issue for determination is whether this matter is on breach of contract as alleged by the Respondents and or a continues breach of the contract as contended by the Petitioner. It is a trite law that, a continuous breach of contract usually happens when there is a series of continuous breaches which may have implications in running of the period of limitations which must go to the date of the commission of the last breach. Thus, the continuous breach can be established from the continuing breach and not the continuing effects of the breach. It means that, there must be a valid existing contract between the parties so that when it is breached then a course of action starts to accrue. The said lease of agreement was executed in 2006 and it was renewed/revised on 2009 since then there is no renewal or revision mentioned in the pleadings, in the absence of evidence to the contrary, it is difficult to say that the agreement subsists, Worse enough, it is plain that the rent

agreement was between the Petitioner and the 1st Respondent on the one hand and Bati Service Limited on the other. More controversial, the property leased belongs to a third party not impleaded in the petition. And to complicate the matter the 2nd Respondent is not a party to the tenancy agreement. These are seen in the pleadings without further evidence. 6 In that circumstance, it is my humble conclusion that, there is no continues breach but rather there is continuous effects of the breach because there was no series of continuous breach on the part of the 1st Respondent. In the present case, there was only one form of breach of contract, that is breach of lease agreement. The nature of the agreement was not one requiring performance on periodic basis of any obligation such that the failure thereof would give raise to a new cause of action. As such the case of Alicheraus Sepherine Mwesiga v Tanzania Portland Cement Company Limited, Civil Case 12 of 2019, High Court of Tanzania, Dar es salaam District Registry (unreported) cited by the Petitioner is distinguished as in the said authority the cause of action was tort. It was neither about company law nor contract law. It is elementary that tort may be a continuous wrong or may have continuing effects. Having so observed the said authority is inapplicable in the present case. In the case at hand, the Petitioner’s counsel

unsuccessfully tried to invoke the provision of Section 7 of the Law of Limitation Act [Cap 89 R: E 2019] to show that it applies in the circumstance. For easy of reference, I reproduce it hereunder. Section 7. "Where there is a continuous breach or continuing wrong independent of a contract a fresh period of limitation shall begin to run at every moment of the time during which the breach or the wrong, as the case may be, continues." With due respect to the counsel for the Petitioner, as alluded to above, the cited provision does not fit in the circumstances of the case at hand as there was no continuous breach of contract. It is clear that the nature of the breach in this petition 7 is not a continuous breach that is refusal to avail the Petitioner share rent would not give rise to a new cause of action. Before proceeding further, I feel obliged to state that under the Company Law, if the property belongs to the 2nd Respondent company, then the Petitioner being a shareholder was entitled to dividends and not the rent as such. But since it has been observed that the property belongs to a third party not impleaded, the whole claims is bizarre. From the pleadings available in the court file, and from what I have held earlier as indicated, there was only one form of breach of contract. It should be noted that continuing cause of action arises from the acts or omission similar to

those in respect of which action is brought. It is undisputed fact that this matter was brought under unfair prejudice and breach of lease agreement. Under the lease agreement there is only one breach as a such the Petitioner cannot say there was continues breach. I must state here that the act of Petitioner to bring the claim of unfair prejudice is in essence distancing herself from the contract law. She is well aware that admitting that the cause of action is based on contract then it will be time barred. That is why she is claiming under unfair prejudice knowing that there is no time limitation provided for bring of an action under the provision of 233 of the companies Act of 2002. I am alive that, the period of limitation for the claim under unfair prejudice is unstipulated. However, the schedule to the Law of Limitation Act [Cap 89 R.E. 2019] prescribing period of limitation for actions or cause of action not specifically provided for in the Act or any other written law applies is 60 days for applications and 6 years for suits. The Petitioner categorically submitted that the Court should focus on arrears of rent which links to continuing breach of contract. But since, the Court has ruled that, there was no continuing breach rather there was continues effect of the breach 8 of contract as per the dates stated in the petition then the learned counsel for Petitioner cannot

shelter under the umbrella of unfair prejudice because the petition is the suit and if that is the position then he is out of time too for want of being filed within 6 years. See the cases of Hussein Gulamabbas Hassanali v Monban Trading and Farming Company Ltd & Two Others, Misc. Commercial Case No. 20 of 2011, HCCD at Dar es salaam, and John Okoth Nyaronga v Mediterranean Shipping Co. Ltd, Misc. Commercial Case No. 6 of 2009 (unreported). The CAT decisions in Tanzania Motor Services Limited and Another v Mehar Singh T/A Thanker Singh, Civil Appeal No 115 of 2005 and Tanzania Cigarette Company Ltd v Mastermind Tobacco (T) Ltd, Civil Appeal No. 7 of 2005 both held inter alia that suit may be instituted by way of a petition. Moreso, the allegation by the petitioner that, there was continuous breach for failure to conduct directors meeting, conducting annual general meeting, conducting any audit, updating the petitioner with ORS and failure to pay government taxes. These allegations will not detain me much because company's failure to discharge its duty is not a continuous breach of contract but rather is an act of running the company contrary to Companies Act. For the foregoing reasons the preliminary objection is sustained, the petition is indeed time barred. Section 3 (1) of the Law of Limitation Act [Cap 89 R.E. 2019] is conspicuous that where a suit or application is time barred it shall be dismissed. The petition is consequently dismissed with costs. It is so ordered. 9 DATED at DAR ES SALAAM this 17th Day of February 2023. U. J. AGATHO

JUDGE 17/02/2023 Date: 17/02/2023 Coram: Hon. U.J. Agatho J. For Petitioner: Gwakisa Sambo, Advocate For Respondents: Gwakisa Sambo, Advocate h/b of Peter Kibatala, Advocate for the Respondents. C/Clerk: Ms. E. Kanju Court: Ruling delivered today this 17th February 2023 in the presence of Gwakisa Sambo counsel for the Petitioner, also holding brief of Peter Kibatala, learned counsel for the Respondents. U. J. AGATHO

JUDGE 17/02/2023 10