Joseph Damian FDJ SENG Vs

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA IN THE SUB-REGISTRY OF MWANZA

AT MWANZA CIVIL CASE NO. 16568 OF 2024 JOSEPH FABIAN DAMIAN ………………………………………….….. 1ST PLAINTIFF FDJ SENG & COMPANY LIMITED …………………………………….. 2ND PLAINTIFF

VERSUS SME IMPACT FINANCE FUND TANZANIA LIMITED ………….… 1ST DEFENDANT MANGWEMBE 2011 COMPANY LIMITED ………………………… 2ND DEFENDANT

JUDGMENT 25th & 31st October, 2024. CHUMA, J. The 1st plaintiff is a businessman and he is currently serving as a director of 2nd plaintiff. He has instituted this suit against the defendants, absent parties, alleging that Default Notice dated the 3rd day of July, 2023 and Demand Notice dated the 25th day of May, 2024 from the 1st and 2nd defendant respectively however both notices (letter) from the defendants were contrary to the requirement of the law as the 1st defendant failed to avail the 1st plaintiff with mortgage deed or schedule of payment nor loan contract or repayment schedule to the 2nd plaintiff regardless of requesting the same from the plaintiff. The plaintiffs further alleged that on the said 1 notices there are list of his properties that were not part of the mortgage deed. As a result, the plaintiffs prayed for the following reliefs: 1. A declaration and an order that the plaintiff is the owner of the landed properties to wit a residential house registered as Title No. 86540, LO No. 570817, Plot No. 13 Block ‘B’ located at Kanyamwanza, Sengerema Urban area and a residential house registered as Plot No. 482, Block ‘UU’ in Sengerema Urban.

2. A declaration and an order that the Sixty (60) days statutory demand notice served upon the plaintiff is defective and contrary to the law.

3. A declaration and an order that the process to sell the plaintiff’s mortgaged properties initiated by the 2nd defendant at the instruction of the 1st defendant is illegal and premature for want of procedural requirement.

4. A declaration and an order that the 1st defendant is under a legal obligation to furnish the plaintiffs with the mortgage deed and payment schedule to the loan advanced to the 2nd plaintiff.

5. The defendant is condemned to pay the costs of this suit.

6. Any other relief (s) as this honorable Court may deem fit and just to grant in the circumstances. When the matter was placed before me for orders on 12th August, 2024, Mr. Kaijage, learned counsel for the plaintiffs informed the Court that the defendant was served with a summons to file a written statement of defence, and that service was acknowledged. This was evidenced by proof of service which was signed by the defendant on 12th August, 2024. In view 2 of the defendant’s failure to file their written statement of defence, Mr. Kaijage prayed to proceed ex-parte. The Court invoked the provisions of Order VIII Rule 14 (2) (a) of the Civil Procedure Code, Cap. 33 R.E. 2019 (CPC), and ordered that the matter proceed ex-parte against the defendants on the 21st day of October, 2024. Before the commencement of the trial, the following issues were framed to guide the conduct of the proceedings: 1. Whether the 2nd plaintiff had entered a loan contract with the 1st defendant.

2. Whether the 1st plaintiff mortgaged properties to wit a house with registered plot No.13 Block B located at Kanyamwanza Sengerema urban area with title deed no 86540, land office (LO) No. 570817 registered in the name of Joseph Fabian Damian and another property registered as plot No.482 block UU in Sengerema Urban area bearing the name of Fabian Damian.

3. Whether the 1st defendant issued the loan contract and mortgage contract to the 2nd plaintiff and 1st plaintiff.

4. Whether the 1st defendant followed procedure when issuing the 60- days demand notice to commence sale of the mortgaged properties.

5. What relief(s) are entitled to the plaintiffs The matter stemmed from a loan agreement executed between the 2nd plaintiff and the 1st defendant for the sum of TZS. 100,000,000/-. To secure the loan, the 1st plaintiff weighed in and became a guarantor of the loan and 3 pledged his two residential houses, Plot No. 13 Block ‘B’ located at Kanyamwanza, Sengerema Urban area with Title Deed No. 86540, land office (LO) No. 570817 and another property registered as Plot No. 482 Block ‘UU’ in Sengerema Urban. While the loan agreement was not furnished to either the 1st or the 2nd plaintiff but still the 2nd plaintiff continued to service the loan until 2023. I will tackle the issues following the sequence in which they were framed, and I will choose to combine the first two issues. These are whether the 2nd plaintiff had entered a loan contract with the 1st defendant and if so, whether the 1st plaintiff mortgaged properties to wit a house with registered Plot No.13 Block ‘B’ located at Kanyamwanza, Sengerema Urban Area with Title Deed No. 86540, land office (LO) No. 570817 registered and another property registered as Plot No. 482 Block ‘UU’ in Sengerema Urban Area. Through the sole witness, PW1, Joseph Fabian Damian, the 1st plaintiff testified that he is a Director of the FDJ Seng & Company Limited, recounting the genesis of what bred the instant dispute, which is that his

company entered into a loan agreement with SME Impact Finance Fund Tanzania Limited. The request was accepted but with a reduction of the amount from the requested 150,000,000 to 100,000,000/= on the ground that one of the pledged securities that is Plot No. 482 had no title deed rather only an offer. 4 He testified that after they had endorsed the loan contract, the same was remitted back to 1st defendant's office at Arusha and promised to send a copy of it to him but he was never issued with the said copy of the loan contract. The 1st defendant's office communicated to him about the deduction or amount to repay monthly orally. On July, 2023 he was issued with a 60-day's Notice containing two additional security which were not part of the mortgaged deed i.e. house No. 482 at Sengerema and Godown located at Kagongwa Kahama, Shinyanga. The said Notice was admitted and marked as exhibit PE1. The witness testified further that after he was furnished with the 60 days notice he reminded the 1st defendant to be supplied with the contract but in vain and still proceeded paying the debt. He recalled on May, 2024 one company known as Mangwembe from Arusha introduced itself and issued to him a 14 days Notice to settle the outstanding loan failure of which the pointed-out securities in the 60 days Notice (exhibit PE1) will be auctioned the said notice was admitted and marked as exhibit

PE2. 5 He then communicated with the defendants via letter from his advocate but nothing changed which led to this suit claiming the reliefs against the defendants as hereinabove. Going by the testimony of PW1, there can hardly be any doubts that there was a loan contract between the 2nd plaintiff to the tune of TZS. 100,000,000/- and 1st defendant and at the same time mortgaged deed between 1st plaintiff and 1st defendant on the properties (Plot No.13 Block ‘B’ located at Kanyamwanza, with Title Deed No. 86540, land office (LO) No. 570817 registered and another property registered as Plot No. 482 Block ‘UU’ both in Sengerema Urban Area) and PW1 stated clearly that they took loan and mortgaged the said properties. The 1st and 2nd issues are answered in the affirmative. The third issue queries whether the 1st defendant issued the loan contract and mortgage contract to the 2nd and 1st plaintiffs. An answer to this question would first require an understanding of the principle of separate corporate personalities, although Mr. Joseph Fabian Damian is a director he was not privy to the loan contract under the doctrine of privity to contract and the 2nd defendant in the eyes of law is a very different person so was entitled to the copy of the said loan agreement. And the 1st plaintiff was entitled to a copy of the mortgaged deed. However, even if the plaintiff 6 testifies that they

took some initiative to obtain copies of the loan contract, mortgage contract, and schedule of repayments there is no proof of the same it was till when they were served with exhibit PE2, it was then they engaged the advocate and wrote to the 1st defendant demanding to be furnished with the copy of loan agreement and in default notice of an intention to sue, nonetheless, plaintiff admitted to having been paying the due regardless of not being furnished with the said documents from the time they signed on 16th day of November, 2021 to 6th day of July, 2023, after defaulting in paying the dues for almost three months as stipulated under exhibit PE1. What I can say is that the plaintiff was aware of the amount they were supposed to pay to the 1st defendant and they have been doing so as stated above regardless of not being furnished with the said documents. Concerning the fourth issue of whether the 1st defendant followed procedure when issuing the 60 days demand notice to commence sale of the mortgaged properties. Because the 1st defendant failed to appear and explain the procedure carried out in implementing the said 60 days’ notice, for ease of reference I will paraphrase what section 127 (1) and (2) of the Land Act, Cap 113 R.E 2019, as follows: - 7 “(1) Where there is a default in the payment of any interest or any other payment or any part thereof or in the fulfillment of

any condition secured by any mortgage or in the performance or observation of any covenant, express or implied, in any mortgage, the mortgagee shall serve on the mortgagor a notice in writing of such default. (2) The notice required by subsection (1) shall adequately inform the recipient of the following matters: (a) the nature and extent of the default; (b) that the mortgagee may proceed to exercise his remedies against the mortgaged land; and (c) actions that must be taken by the debtor to cure the default; and (d) that, after the expiry of sixty days following receipt of the notice by the mortgagor, the entire amount of the claim will become due and payable and the mortgagee may exercise the right to sell the mortgaged land.” Looking at exhibit PE1 all requirements stated in section 127 (1) and (2) have been complied with by the 1st defendant. So, this issue was answered in the affirmative as it has identified both oral and written agreement and the plaintiff testifies that were told orally on how to pay the dues and they did so by paying the debt, except on the additional securities which were not part of the mortgaged properties to wit house No. 482 at Sengerema and Godown located at Kagongwa Kahama, Shinyanga. 8 What comes out is as held in the celebrated case of CRDB Bank Limited Vs. Issack B. Mwamasika & 2 Others, CAT-Civil Appeal No. 139 of 2017 (unreported), in which

it was held that guarantors cannot escape the legal consequences arising out of loan obligations they guaranteed but in respect of which the principal debtors have failed or defaulted to repay. The upper Court’s view in this respect is that a person who guarantees a loan commits his property and puts his property at risk should there be a default by the principal debtor. It is a burden cast on the shoulder of the guarantor in case the principal debtor decides to renege on his loan obligation. So, the only relief the plaintiffs are qualified and entitled to is to declare the 1st plaintiff as the rightful owner of the house No. 482 at Sengerema and Godown located at Kagongwa Kahama, Shinyanga as they were not part of the mortgaged properties. And at the same time 1st plaintiff is entitled to be furnished with the mortgage deed and payment schedule to the loan advanced to the 2nd plaintiff, if it is as rightly testified by the PW1 that the said documents were not issued to him after the endorsement, because being part of the said contract he has the right to obtain the copy of the same. 9 All said and done, the plaintiff managed to prove the suit to the extent herein above stated. Owing to the circumstances of this case, I desist from making an order for cost. It is so ordered. The right of appeal has been duly explained. DATED at MWANZA this 31st day of October, 2024. W.M. CHUMA

JUDGE 10 The Judgment delivered in court before Mr. Boniphase advocate for the plaintiffs and in absence of the defendants this 31st day of October, 2024. C. KISONGO

DEPUTY REGISTRAR 11