20070420 TZHC Dar es Salaam

,, i .. ,,, IN THE HIGH COURT OF TANZANIA J ' COMMERCIAL DIVISION J AT DAR ES SALAAM ,j• . COMMERCIAL CASE NO. 113 OF 2005 ALLIANCE INSURANCE CORPORATION LIMITED ...................... PLAINTIFF VERSUS SCANDINAVIAN EXPRESS SERVICES LIMITED ................................. DEFENDANT JUDGMENT Date of final submission April 2, 2007. Date of Judgment April 20, 2007. MJASIRI, J. The Plaintiff in this case is a limited liability· company registered in Tanzania to carry on the business of Insurance. The Defendant is a limited liability company incorporated under Cap.212 of the laws of Tanzania and it operates abusiness of passenger buses transportation in Tanzania and in neighbouring countries. The Plaintiff claims from the Defendant the sum of TShillings Two -Hundred Thirty Six Million, Seven Hundred Seven Thousand Three Hundred Thirty six (TShs 236, 707,336/=) being an amount due and owing from the Defendant in respect of nine (9) cheques drawn by 1 C the Defendant in favour of the Plaintiff, which cheques when presented for payment were dishonoured by the Defendant's Bankers. The Plaintiff .. also claimed for interest and costs. It was alleged by the Plaintiff that the said cheques and the amount shown thereon were in respect of payment of insurance premiums for motor vehicle insurance polices sold to the Defendant for the Defendant's fleet of passenger buses. The Plaintiff filed a summary suit under Order XXXV of the Civil Procedure Act Cap.33 [R.E. 2002]. As there were triable issues the court granted the Defendant leave to defend the suit. The Defendant denied the Plaintiffs claim. The Defendant denied that it was or is indebted to the Plaintiff to the sum of TShs 236,707,336 as alleged by the Plaintiff. According to the Defendant the cheques in favour of the Plaintiff were issued as security for cash money that would be paid at a future date. The Plaintiff cancelled the Defendant's insurance polices thereby rendering the Defendant uncovered in which case there was no consideration to support the contract of insurance. The Plaintiff in this case was represented by Mr. Lyimo Advocate and the Defendant was represented by IMMA Advocates. The following issues were presented by the Counsels for both parties and approved by the court: 2 r 1. Whether the cheques drawn by the Defendant were issued as security for future cash payments to the Plaintiff. 2. Whether there was consideration on the part ofthe plaintifffor the issuance ofcheques. 3. Whether the Defendant is indebted to the Plaintiff for the sum of TShs 236,707,336. 4. What reliefs ifany are the parties entitled to. The Plaintiff called two witnesses. PWl PRADHIP KUMAR SRIVASTAVA is the Technical Manager with Alliance Insurance. PWl was entrusted with responsibility of overseeing that insurance polices are issued properly and correctly and claims are properly handled. PWl testified that Scandinavia Express the Defendant has been the Plaintiffs clients for a couple of years. Following a meeting held between Alexander Forbes (Insurance Brokers) and Defendant, it was agreed that the premium for the buses will be paid by post dated cheques. This meeting took place after the Defendant failed to pay . . insurance premiums. PWl recalled to have received post dated cheques drawn by Scandinavia Express in favour of Alliance Insurance between the months of April and October 2005. The cheques were for the 3 premium due from the Defendant for the insurance provided by Alliance Insurance Limited for buses owned by the Defendant. The cheques were drawn and signed by the Scandinavian Express Services Limited for a total sum of Shs 236,707,336. There was a total of 9 cheques which were deposited to the Bank by the Plaintiff. The cheques were not honoured by the Bank. This means that insurance premiums were not paid. The insurance company immediately contacted the insurance brokers requesting for payment of premiums by banker's cheque or cash. The Defendant promised to pay. As no payment was effected, the Plaintiff filed a suit. PWl prayed for judgment against the Defendant. According to PW 1 there was no arrangement between Alliance Insurance and Scandinavia Express that the amount shown on the cheque would be paid by cash and the cheques given to the Plaintiff were to simply serve as security for the cash payment. The Cheques drawn and signed by Scandinavia Express Limited were tendered in court by PWl and admitted in court as Exhibit P 1 collectively. On cross examination by the Advocate for the Defendant, PWl stated in court that 90% of the insurance sold to the Defendant is for buses and the remaining 10% for buildings. The meeting held on 27/1/2005 was between the insured the (Defendant) and the Brokers. The minutes of the meeting were sent to the Plaintiff. It was decided 4 that Scandinavia Express Limited issue postdated cheques for payment of insurance premiums for buses. Alexander Forbes is one of the biggest Broker in the market and once an agreement was reached for the insurance premiums to be paid by way of postdated cheques, the Plaintiff honoured the arrangement. According to PWl prior to January 27, 2005 Scandinavia Express owed the insurance company money. The payment of premium is supposed to be made within 60 days through the Brokers. However if there is an agreement with the insurance company other arrangements can be made. PW 1 further stated that the post dated cheques were accepted in good faith for settlement of outstanding premiums. When the first cheque which was deposited was dishonoured the Plaintiff contacted the Defendant's financial person. The Defendant stated they were making arrangements to sort out the problem. Cheques which were re-deposited were dishonoured. On re-examination PWl stated that it is a practice for credit facilities to be allowed. The arrangement for post dated cheques is normal. PW2 FRANCIS KAMWAMBIA is an employee of Alexander Forbes Tanzania Limited. He is the Risk Analysis Manager. The Insurance Broker placed the business of insuring Scandinavia Express Buses with Alliance Insurance. According to PW2 the insurance policy was issued by Alliance Insurance and was passed to Alexander Forbes to forward to clients. The policies were issued in 2005. Policy 5 No.8100312 was issued for the period of May 14, 2005 to November 15, 2005 for TShs 151,800,000 covenng 21 buses. Policy No.81001469 was for the period from 28 th January, 2005 to November 2005 for TShs 54,300,000/=. (Exh.P2A). Policies 81001476 and 8100174 (Exhibit P2A) for TShs. 129,100,000/= and TShs 81,000,000 covering the period January 28, 2005 to November 15, 2005. The premium cheques received by Alexander Forbes were drawn by Scandinavia Express in respect of premium payment for a total amount of Tshs 236,707,336. According to PW2 the said cheques were dishonoured. On Cross Examination by the Counsel for the Defendant PW 1 stated that the cheque were dated May to October 2005. All the cheques passed through the Insurance Broker. Therefore all the cheques were received by PW2. According to PW2, with regards to Exh.P2A Policy No.81001474 the duration period on the photocopy of the policy is 28th January 2005 to 27 th January 2006. The original policy duration is 28 th January 2005 to 15 th November 2005. Policy No. 84001476 the duration period on_the photocopy shown is 28 th January 2005 to 27 th January 2006. The duration period on the original policy is 28 th January 2005 to November 15, 2005 (Exhibit P2A). With regards Exh.P2B Policy No.8100312 the duration period on the photocopy is 14th October 2005 to 13 th May 2006. The original policy duration is14th May 2005 to November 15, 2005. According to PW2 the polices varied because the client wanted the 6 policies to have one expiry date. No cash payment was made by Scandinavia Express in lieu of the cheques presented. The Defendant called one witness Mohamed Abdallah Ben Eshaq. DWI testified that he is the Managing Director of Scandinavia transportation business, Scandinavia Express and Ben Eshaq. His companies were formerly insured with National Insurance Corporation between 2001 - 2005. The Companies were then insured by Alliance Insurance. According to DWI there were discrepancies between the original policy and the copy which _is with the Defendant. Exhibits P2A and P2B relevant. Policy No.81001469 has a duration period from January 28, 2005 to November 15, 2005. However the copies which are with the Defendant have a duration for January 28, 2005 to January 27, 2006. The four policies covered a total amount of Tshs 315,600,800/=. According to DWI payment was made on account, this was to off set a certain amount. The balance was to be paid later depending on the arrangement and/ or the agreement. According to DW 1 in 2004 Alliance Insurance raised insurance premiums. This was after the Scandinavia buses were involved in accidents. The premium was raised from 4.2% to 6% and later to 9%. In the January 2th 2005 meeting held between Alexander Forbes and Scandinavia Express, it was agreed that the Defendant would give Plaintiff some cheques as security in the eventuality that a premium is required. Some cheques were filled and some were open. DWI testified that the cheques were issued on the evening of 27/1/2005 7 ,. after the meeting. The Defendant issued about 15 cheques. The cheques were signed by DWI. DWI filled in the amounts for 5 cheques out of the 9 cheques (Exhibit P 1). DWI did not know who filled in the amount for the other cheques. According to DWI, the Defendant paid to the Plaintiff a total amount of Shs 404,812,488/=. Some of the vehicles included in the insurance policies belonged to Scandinavia Tours Limit (STL). The cheque's were not supposed to be banked by the Plaintiff as they were given as a matter of security. According to DWI the policies were tampered with by the Plaintiff, since the expiry dates were different from the ones in the custody of the Defendant. On cross examination by the Advocate for the Plaintiff DW 1 stated that the mode of payment was by installments. The Defendant gave the Plaintiff cheques as security and whenever payment of premiumwas due they could use the cheques to pay the premium. It was agreed that the cheques would be paid as security. The agreement with the Plaintiff was not attached to the pleadings. Defendant did not plead that blank cheques were used as security. With regards to issue No_. I. Counsel for the Defendant in his submission argued that the cheques drawn and signed by the Defendants Exhibit Pl were issued as security for future payment of premiums. According to Counsel the parties resolved to the issuance of post dated cheques in the meeting of January 27, 2007. This was according to the testimony ofDWl. 8 Cheques constituting Exhibit Pl are not the only cheques issued by the Defendant for the payment of premium, Counsel for the Defendant stated in his written submission. With regards to issue No.2 Counsel for the Defendant submitted that the Plaintiff did not furnish consideration. According to Counsel there was no contract of insurance as the Plaintiff did not honour the Defendant's claims. The learned Counsel also submitted that the different expiry dates on the original policies and on the copies in the possession of the Defendant constituted forgery. The policies tendered and admitted iri court Exhibit P2A and P2B cannot be accepted as the proper insurance policies. Counsel also submitted that the Plaintiffs msurance cover was cancelled on November 15, 2005. With regards to issue No.3 Counsel for the Defendant submitted that since there was no consideration on the part of the Plaintiff, then there cannot be any claim from the Plaintiff against the Defendants. With regards to issue No.4 the Defendant asked the court to dismiss the Plaintiffs claim with costs. 9 On issue Number one ( 1)Counsel for the Plaintiff submitted that the post dated cheques amounting to the sum of TShs 236,707,336/= were not issued to the Plaintiff as security for cash payments to be made at a future date. According to the Counsel for the Plaintiff the dishonoured cheques were payments in respect of various premiums in respect of insurance policies issued to the Defendant. The testimony of PWl, PW2 and Exhibits Pl and P2A & P2B relevant. According to the counsel for the Plaintiff it was at the meeting between the Insurance Company and the Insurance Broker, that it was agreed that the Defendant would issue post-dated cheques. The Defendant has failed to present any evidence in court in support of this contention. With regards to Issue No.2, the Counsel for the Plaintiff submitted that there was consideration as the post dated cheques formed part of the payment of insurance premium in respect of motor insurance policies sold to the Defendant. PW2 tendered in court Insurance policies issued by the Plaintiff to the Defendant through the insurance Brokers in respect of the Defendant's buses. The premium chargeable on the said policies was TShs 417,300,000/=. No evidence was adduced by DWl in support of the cancellation of the insurance policies by the Plaintiff. With regards to the testimony of DWl that the insurance policies tendered in court by the Plaintiff (Exhibit P2A & B differed on the period covered was not pleaded in the Written Statement of Defence, Counsel for the Plaintiff stated that the copies of the policies which are m possession of the Defendant were not tendered in court as exhibit. 10 .... According to the Counsel for the Plaintiff, the Plaintiff provided consideration in respect of the 9 cheques provided by the Defendant to the Plaintiff (Exhibit Pl) in view of the insurance policies. With regards to issue No.3 the Counsel for the Plaintiff submitted that the Defendant was indebted to the Plaintiff. Counsel for the Plaintiff submitted that as the Defendant sold insurance policies to the Defendant. The Defendant issued post dated cheques as part payment to the Plaintiff. As issue No.2 has been answered positively. It has been established that the Defendant is indebted to the Plaintiff. After a careful review and assessment of the evidence adduced in court, I wish to make the following observations. With regards to issue N o.1, as to whether the cheques drawn by the Defendant were issued as security for future cash payment, I would like to state as follows: No evidence has been adduced in court to show that there was an arrangement made between the Plaintiff and the Defendant that postdated cheques issued by the Defendant were not to be banked by the Plaintiffbut to be retained as security. PW2 an insurance broker testified in court that the post dated cheque arrangement was agreed by the Plaintiff after the Defendant 11 failed to pay the premiums. This arrangement was agreed upon in a meeting held between the Brokers and the Defendant. A post dated cheque is a cheque with a future date entered. The cheque cannot be cashed until the date is reached. The cheque has a date in the future and essentially means that the customer intends the Bank will not pay the cheque earlier than the date inserted on the cheque. As no evidence has been brought forward contrary to the normal/everyday practice in respect of post dated cheques. Issue No.1 is answered negatively. With regards to Issue No.2 whether there was consideration on the part of the plaintiff for the issuance of the cheques, I would like to look into the following. According K.JAIYAR 13 th Edition, Consideration is defined as under: "Consideration is an act or forbearance or the promise thereofof which is offered by one party to an agreement and accepted by the other as an inducement to the other's act or promise. Cheshire and Fifoot, 14th Edition (Indian Reprint) defines consideration as follows: 12 "The act or promise offered by the one party and accepted by the other as the price ofthat promise. " Section 2(l)d of the Law of Contract Act Cap.345 [R.E.2002] provides as under: "When, at the desire ofthe promisor, the promisee or any other person has done or abstainedfrom doing, or does or abstains from doing, or promises to do or abstain from doing something, such act or abstinence or promise is called consideration for the promise. " In Dunlop V Selfridges Limited 1915 AC 847. Consideration was defined as under: ''An act or forbearance of one party or the promise thereof is the price for which the promise of the other is bought, and the promise that given for value is enforceable. " In view of the evidence of PWI and PW2,Exhibits Pl ,and P2A&B, it has been established on the balance of probability that the Plaintiff sold insurance policies to the Defendants and the Defendant made part of the payment for such policies by way of post dated cheques. In view of the fact that issue No. I has been answered in the negative, the Defendant provided consideration for the post date cheques. Issue No.2 in answered positively. 13 With regards to Issue No.3, in view of the court findings on issue No. I and 2 it has been proved on the balance of probability that the Defendant is indebted to the Plaintiff for the sum of Tshs 236,707,336. DWI in his testimony stated that the Defendant had cancelled the insurance agreement with the Plaintiff after the Plaintiff failed to make payment to insurance claims made by the Defendant. The Defendant did not produce any documentary evidence in support of the said claim and/ or any details relating to the said cancellation of the insurance policies. Issue No.3 is therefore answered positively. With regards to the reliefs the parties are entitled to, I would like to state as under. It is my finding that the Plaintiff has proved its case against the Defendant on the balance of probability and Judgment is therefore entered in favour of the Plaintiff as follows: 1. Judgment is entered for the Plaintiff for the principal sum of TShs 236,707,336. 2. Interest on the sum of TShs 236,707,336 at 20% per annum from the date offiling the suit to the date ofjudgment. 14 • I . ' vii ~ ~· 3. Interest on the decretal amount at the court's rate of 7% per annum from '-, the date ofjudgment until full payment. I{ 4. Costs ofthe suit. It is hereby ordered accordingly. Sauda Mjasiri Judge April 20, 2007 Delivered in Chambers this 20th day of April in the presence ofMr. Lyimo and Mr. Nyika Advocates. Sauda Mjasiri Judge April 20, 2007 3,893 ~ words jd 15