20151216 TZHC Dar es Salaam

IN THE HIGH COURT OF TANZANIA (DAR ES SALAAM DISTRICT REGISTRY) AT DJ~R ES SALAAM CIVIL CASE NO 97 OF 2009 BADR EAST AFRICAN ENTERPRISES LIMITED .......... 1 sT PLAINTIFF PRISMO UNIVERSAL ITALIAI\IA S.P.A ...................... 2No PLAINTIFF VERSUS ATTORNEY GENERAL OF THE UNITED REPUBLIC OF TANZANIA ......................................... DEFENDANT , 16/07&18/12/2015 JIUDGMENT MWANDAMBO, J. The Plaintiffs have preferred the instant suit for damages for trespass allegedly committed by Tanzania National Roads Agency known by its acronym as TANROADS and for detinue of their plant, equipment, machinery and other goods that had originally been mobilized for the purpose of carrying out a contract between them (the Plaintiffs) and . TANROADS pursuant to a road construction contract executed on 23 February 2007. The Defendan~: has been sued as a necessary party pursuant to the provisions of section 6 (3) of the Government Proceedings 1 (~I .••- ., I Act [Cap 5 R.E 2002] to redress a civil wrong the Plaintiffs allege that was committed by the said TANROADS also known as the Employer under the contract. The Facts giving rise to the suit are fairly not in dispute and well captured in the submissions of the parties. The Plaintiffs had an arrangement to jointly perform a contract which was awarded by TANROADS by a letter of 17 February 2007 which is part and parcel of the contract between the Plaintiffs and TANROADS. The Plaintiffs thereafter executed a Joint Venture on 21 February 2007 (''Exhibit "P2''). On 23 February 2007, the Joint venture partners then entered into a contract with TANROADS for the upgrading to bitumen standard of the Marangu-Rombo Mkuu and· Mwika-Kilacha Roads · ih Moshi, Kilimanjaro Region · (the · "Contract"). The contract was tendered in evidence as Exhibit Pl. With respect to the Contract, the Plaintiffs operated under a joint venture known as "Prismo-Badr JV". The joint venture parties opted to sue in their own names and pursue jointly and severally their claims against TANROADS. It is common ground that subsequent to the signing of the Contract, . the Employer made advance payment to the Contractor in the sum of TShs I ' 681, 898, 452.59 and Euro 1, 795, 476.89 equivalent to 20% of the contract sum towards mobilization costs which sum was recoverable through interim payment certificates. On the other hand, the Contractor mobilized equipment, personnel and resources to carry out the contract on site and commenced work in Moshi, Kilimanjaro. In the course of performing the contract, disputes arose with TANROADS who complained against the Contractor of delay in the works and other non-compliances. 2 (' Accordingly, on 16 January, 2008 the Employer acting through one Peter J. Easther of Norconsult AS of Norway issued a Notice of Contractor's Default which was disputed by the Plaintiffs through a letter of 21 January 2008 (Exhibit "P4''). The letter also gave a notice of intention to refer the matter to a Dispute Review Expert in terms of Article 67 .1 of the Contract. As a result of TANROADS's refusal to attend to the Plaintiffs' proposed Action Plan, the Contractor commenced the dispute resolution process. On 13 March 2008 TANROADS issued a Notice of Expulsion to take effect in 14 days (Exhibit "PS'') and since the Contractor was suspended from continuing with the work, the Plaintiffs secured the equipment in a compound on land leased by the Plaintiffs. Prior to the expiry of the notice of expulsion on 25 and 26 March 2008, TANROADS seized the construction equipment and installed its own guards at the gates and forced the agents of the Contractor to leave the site. Following the .seizure, the plant and other items remained in the physical possession of TANROADS from March 2008 until the filing of the suit in June 2009 and thereafter until 13 August 2009 when the equipment were released to the Plaintiffs following a meeting between the Plaintiffs and TANROADS at which the parties discussed the Plaintiffs' claims for general, special and aggravated damages arising out of trespass and detinue of the Contractor's plant, equipment and other goods. The minutes of the meeting were tendered in evidence as Exhibit P14. Earlier, on 10 February 2008, and prior to expulsion and seizure of equipment, the Contractor had requested the International Chamber of Commerce to appoint a Dispute Review Expert in respect of disputes of 3 alleged default by the Contractor in accordance with the dispute resolution contained in Article 67.1 of the Contract. The Dispute Review Expert (the "DRE'') issued his recommendations in August 2008 (Exhibit "P7''). In his recommendations, among others, the DRE recommended that: (i) The Contract was void ab initio because when the Plaintiffs entered into contract with TANROADS neither the Joint Venture nor the 2nd Plaintiff was registered with the Business Registrations and Licensing Agency known by its acronym as BRELA. (ii) The advance payment was properly utilized by the Plaintiffs for the purpose of mobilization. (iii) All impounded Plant and Equipment be returned by the TANROADS to the Plaintiffs. (iv) TANROADS had no entitlement to restitution by way of any or all advantages or benefit acquired by the contractor under the contract, including no entitlement to recovery of the advance payment and payments made to the Plaintiffs for the work done. Under Clause 67.1 of exhibit Pl an aggrieved party had a right to refer the matter to arbitration. It is common ground that neither the Plaintiffs nor TANROADS referred the DRE recommendations to an Arbitrator for arbitration; either to challenge it or enforce it. The Plaintiffs contend that because the DRE recommendations were not 4 challenged by way of reference to arbitration by any party aggrieved of them within the prescribed period of 14 days they became final and binding on the Contractor and TANROADS within the terms of Article 67.1 of the Contract. Nevertheless, TANROADS retained the impounded Plant and Equipment. In response to the Contractor's demands, TANROADS offered two reasons for its refusal to deliver up the Plant and Equipment. One, as a lien for the Advance Payment and, two it did not know the recipient to whom the Plant and Equipment was to be handed over (Exhibits P. 12A, P.12B). As a result of TANROADS' refusal to hand over the Plant and Equipment, the Plaintiffs instituted this suit based on the tort of trespass to goods and detinue as explained earlier. In the Written Statement of Defence and counter claim, the Attorney General resists the Plaintiffs' claims praying for the dismissal of the suit. In the latter, the Attorney General makes general claims for Advance Payment, storage charges of the Plant and Equipment, and additional cost for the new contractor among others. However, apart from making general claims for advance payment, the defendant did not go further by seeking a specific relief on it. On the other hand, on 12 August 2014 the Defendant abandoned the claim on additional cost for the new contractor contained in prayer (d) and (e) in the written statement and counter claim thereby remaining with the claims on the storage charges. On 12 August 2014 my sister (Teemba, J) recorded seven issues in consultation with the counsel for the parties namely: 5 ,.. ' 1. Whether the Plaintiffs jointly or severally, were entitled to immediate possession the equipment and goods detained by TAN ROADS; 2. Whether TANROADS continued to detain the equipment and other goods after proper demand had been made by the Plaintiffs for their return or restoration; 3. Whether the Plaintiffs neglected to respond to TANROADS as to whom the equipment should be handed over; 4. Whether TANROADS wrongfully interfered with Plaintiffs' possession of the equipment and other goods; 5. Whether TANROADS' conduct and motives aggravated the injury caused to the Plaintiffs; 6. Whether the Plaintiffs were legally obliged to pay storage charges to TANROADS in respect of the equipment and other goods detained by TANROADS; and 7. To what reliefs are the parties entitled. Subsequently, on 9 October 2014 the Defendant filed three additional issues which in his view were necessary for the determination of the suit. The said issues are as follows: 1 whether at the time of executing the contract No TRD/HQ/1026/2006/07 between the Plaintiff as a joint venture and TANROADS, the 2nd Plaintiff had the capacity to contract. 2 If the answer to issue No 1 above is negative, whether the said contract is valid in law. 6 ,. 3 Whether the Defendant was entitled to the refund of Euro 1, t 795, 476.89 and TShs 681, 898, 452.59 made to the Plaintiffs. Since the issues were filed late just immediately before the commencement of the trial, I promised to consider them later in terms of the provisions of Order XIV Rule 5(1) of the Civil Procedure Code, [Cap 33 R. E 2002] if I found them to be necessary for the determination of the suit. I will do so later in this judgment. During the hearing, the Plaintiffs who had the services of Dr. Wilbert Kapinga learned Advocate from Mkono & Co. Advocates fielded only one witness one Eugenio Denis Venier (PW1) a civil engineer by profession who boasted to have been in the field for over forty years. His testimony was largely a narration of the events leading to the institution of the suit. At the end of the day he tendered a total of 17 documentary exhibits in support of the Plaintiffs' cases praying for the reliefs in the plaint except those which the Plaintiffs had already dropped before the commencement of the trial. The case for the Defendant was presented by Tumaini Senyaeli Sarakikya (DW1) whose evidence was by and large based on the documentary exhibits tendered by PW1. Specifically, DW1 gave reasons for the contractor's notice of default and the expulsion from the site being failure by the Contractor to perform its contractual obligations. DW1 also confirmed the reference of the dispute the Plaintiffs had referred to ICC and the DRE's recommendations and the fact that although TANROADS was dissatisfied with most of the recommendations it did not refer the matter to arbitration because the DRE had ruled that the contract was void ab initio by reason of lack of capacity to contract by the second 7 Defendant as one of JV partners who had entered into the contract with TANROADS. DWl also confirmed that the second Defendant was not yet registered with BRELA as well as CRB on the date TANROADS made advance payment to the Contractor. As to the seizure of plant and equipment, DWl testified that TANROADS had a right to seize and detain them upon the Contractor's default and after the recommendations of the DRE, TANROADS continued to hold the said plant and equipment as a lien for the advance payment which had it not yet recovered from the Contractor at the date of the seizure. Testifying on the counter claim, DWl told the Court that TANROADS had incurred expenses on account of allowances it paid to the police for guarding them as well ·as for fuel for ferrying the police to and from the site. However, DWl did not produce any documentary proof to substantiate his claim on the refund for storage charges. In fine, he prayed that the court dismisses the suit with an order for the payment of the Advance payment and a declaration that the contract (exhibit Pl) was void ab initio. After the completion of the trial, the Court invited counsel to present their final submissions in writing which they dutifully did. I am grateful for the industry each has demonstrated in the submissions but I must state at this stage that I will not address each of the submissions made not out of immodesty but because of the approach I have taken in disposing the suit which makes it irrelevant to deal with all of the points raised and the authorities placed before the court. Submitting on the first issue, the learned Counsel for the Plaintiffs invited the court to answer it in the affirmative because TANROADS had refused to return the plant and 8 ~ equipment it seized from the Plaintiffs after a notice of default issued under Clause 63.1 of exh. Pl. Counsel submitted that TANROADS refused to implement the recommendations of the Dispute Review Expert (DRE) who had adjudicated that TANROADS had no title to the said goods ordering it to return them to the Plaintiffs. By reason of the fact (based on DRE's recommendations) that TANROADS had no title to the plant and equipment, it had an obligation to return them to the Plaintiffs. As authority for his proposition, Counsel referred the Court to Jarvis V. Williams [1955] I.W.L.R. 71, Tappenden V. Artus [1964] 2Q. B 185 and Gledustand V. Hewitt(1832) 1 Cr. & J. 565,570. For his part, Mr Karim Rashid, learned Senior State Attorney prefaced his submissions by attacking the validity of the Plaintiffs' claim based on DRE's recommendations for several reasons. One, the DRE's recommendations cannot be enforced by the Court by way of a suit in the manner the Plaintiffs have attempted to do because failure to implement them gives rise to reference to arbitration under clause 67.4 of exh. Pl. Two, the DRE's recommendations were not and cannot be enforced by court action because they had no status of an arbitral award but even if that was the case, the procedure for registering an arbitral award under section 12 (2) and 17 of the Arbitration Act [Cap 15 R.E 2002] has not been complied with. Three, the mounting of the suit to enforce the DRE's recommendations was tantamount to treating them as if they constituted a cause of action for the tort of trespass and detinue when in actual fact they were only admissible in evidence in support of a cause of action subject to their probative value. Four, the said recommendations were to a large 9 extent unwarranted in the light of the DRE's determination that the contract (exh. Pl) was null and void ab initio. With specific reference to the first issue, the learned Senior State Attorney strongly submitted that the Plaintiffs were not entitled to immediate possession of the plant and equipment because TANROADS had a lien on the said goods in respect of the Advance Payment towards mobilization costs which had not yet been recovered at the date of expulsion of the Plaintiffs from the site. It was the learned Senior State Attorney's further submission that despite the fact that according to DRE's recommendation the contract was void ab initio, the Plaintiffs had a statutory obligation to return any advantage/ benefits derived from such an illegal contract pursuant to section 65 of the Law of Contract Act [Cap. 345 R.E.2002]. Before I proceed to make a determination of the issues I wish to make it clear that on 3 June 2015 when I ordered counsel to file their closing submissions simultaneously I gave them an opportunity for oral submissions after the filing to clarify and highlight on any issue they considered necessary including making comments (if any) on any issue raised in the submissions of the other party. When the matter came for an oral submissions on 16 July 2015, I only heard brief oral submissions from Mr. Rashid, learned Senior State Attorney. Dr Kapinga had nothing useful to add to his submissions filed earlier. Having examined the submissions for and against the first issue, I think it is glaringly clear that the suit is premised on the DRE's recommendations in the absence of which no suit would have been instituted in the first place. This is evident from the pleadings as well as the 10 tli evidence by PW1 who was emphatic that the suit was necessitated by TANROADS' refusal to implement the said recommendations. It is equally beyond controversy that the none of the parties saw it fit to challenge the said recommendations through arbitration as a result of which, according to Clause 67.1 the said recommendations became final and binding and Counsel are at one on this although they part company as to whether upon refusal to implement such recommendations the Plaintiffs would resort to Court rather than arbitration pursuant to clause 67.4 of exh. Pl. The learned Counsel for the Plaintiffs submits that reference to arbitration was without prejudice to any other right the Plaintiffs may have which includes instituting a suit. The learned Senior State Attorney thinks otherwise. That being the case, it seems to be clear that the Plaintiffs' cause of action for trespass and detinue can only be based on DRE's recommendations rather than on anything else as highlighted above. A determination of the issue as to whether the recommendations could indeed found a cause of action for the tort of trespass and detinue calls for their examination in the light of exhibit Pl. At para 25 of the plaint, the Plaintiffs aver that the DRE found the Contract to be void ab initio but such a finding survived the perishing of the host contract which is severable from the dispute resolution clause and hence notwithstanding the invalidity of the said contract, the DRE's recommendations arising from a void contact as it were, became final and binding on the parties the moment none of them challenged those recommendations through arbitration. With respect, whilst it is trite that a dispute resolution clause is an independent clause in a contract which survives termination of the 11 i' agreement (sometimes called a standalone clause). I am unable to follow the argument that such a position obtains in these proceeding. This is because the survival of a dispute resolution clause presupposes that the host contract is in the first place valid and capable of hosting it. That being the case was it proper for the DRE as he did in exh. P7 to determine the rights and obligation of the parties after finding that the contract was void ab initio? By definition a void contract is which is illegal as formed and which the law treats as it had not been made at all- see: Magul Steamship Co. V.MC Gregory Gow & Co. [1892] AC 25 at 39 per Hatsbury ( referred in Cheshire and Fiffoot and Furmston s Law of Contract, Michael Furmston J4h edition Indian Reprint at page 424). Such contract is totally void and no remedy is available to either party. Where an award is made in respect of a prohibited contract such award will be set aside by the Court. In David Taylor & Sons Ltd V. Barnet Trading Co. [1953] All. ER 843 a dispute arose in a contract of sale of goods in which the buyer agreed to buy canned meat from the seller at a price more than the statutory maximum. The seller failed to deliver the goods contracted and the matter was referred to arbitration before two arbitrators. Upon their disagreement, the arbitrators referred it to an umpire who directed that the seller should pay certain sums of money to the buyer. A motion to set aside that award on ground that the contract was illegal and for misconduct of the umpire did not succeed in the High Court. Apparently the Umpire omitted to decide an issue on the legality of the contract. On appeal, it was held that the umpire had a duty to decide questions submitted to him according to 12 ( the legal rights of the parties and to decline to make an award enforcing an illegal contract. In his speech, Lord Denning had this to say in part: "There is not one law for arbitrators and another for the Couf"l but one law for all. If a contract is illegal, arbitrators must decline to award on it just as the Court would do. In my opinion, the Court has jurisdiction to set aside an award based on an illegal contract.. An arbitrator has no jurisdiction or authority to award damages on an illegal contract. it is obvious that the Court would not itself enforce such an award and equally it should not allow it to stand (emphasis added - at 846). Subjecting the above case to the issue under consideration it is clear that just as an arbitrator or the court would not enforce a contract which is on the face of it illegal, the DRE was in no better position to make further recommendations akin to determining the rights of the parties upon being satisfied that the contract was void. He had no jurisdiction or authority to make recommendations on TANROADS' title to the plant and equipment it had seized from the Plaintiffs neither did he have jurisdiction to order immediate return of those goods to the Plaintiffs. Such recommendations were made in excess of DRE's jurisdiction and I need not cite any authority to support a proposition that a decision made without or in excess of jurisdiction is no decision in law and in the circumstances, the recommendations of the DRE on the return of plant and equipment to the Plaintiffs had no legal effect. Regardless of reference to arbitration, the said recommendations could not become final and binding on any of the 13 l " parties capable of being implemented by TANROADS failing which constituting a cause of action in trespass and detinue. Accordingly I hold that the Plaintiff jointly or severally were not entitled to immediate possession of the equipment and goods detained by TANROADS because the right· to immediate possession was founded on an invalid recommendation by the DRE. For avoidance of doubts, my finding on this issue will not affect the mutual agreement for the return of the plant, equipment and other goods pursuant to the minutes admitted in evidence as exh. P14. Having answered the first issue against the Plaintiffs, I will only address the rest of the issues in brief because most of them are anchored on the first issue. Since I have held that the Plaintiffs had no right to immediate possession of the plant and equipment, I answer the second and third issues in favour of the Defendant and hold that in the absence of the right to possession based on the DRE's recommendations, there could not have been any proper demand for restoration of the goods capable of being acted upon by TANROADS. As regards issue No 4, I equally hold that in so far as the claim is founded on DRE's recommendation which I have held to be invalid, there could not have been any wrongful interference with the Plaintiffs' possession of the equipment and other goods in tort and thus I answer the issue against the Plaintiffs. Likewise, issue No. 5 is answered negatively because the basis upon which TANROADS's conduct and motives resulting into an injury has not been established by the Plaintiffs. In the absence of 14 _,/ r the right to immediate possession based on the DRE's recommendations there could be no conduct and motive inconsistent with the Plaintiffs' right to possession which could have aggravated any injury to them. Issue No. 6 relates to the Plaintiffs' liability to pay for the storage charges in respect of the equipment and other goods detained by TANROADS. The said plant and equipment was released by mutual agreement following a meeting held on 21 July 2007 involving officers from the Ministry of Infrastructure, the Plaintiff and TANROADS per exhibit Pl4. According to the Defendant, TANROADS was compelled to keep custody of the plant and equipment at its cost following expulsion of the contractor from site and because it had a lien on those goods for the Advance payment. The Plaintiffs for their part submit that TANROADS had no right to expel the contractor from site and if I understood them they are saying, TAN ROADS took upon itself detaining the goods at its own risk as to costs. At any rate, the Plaintiffs argue that there was no evidence led to substantiate those costs through the only witness testified for the Defendant. Upon examination of the pleadings, evidence on record as well as the submission by counsel, I am constrained to answer the issue negatively for two reasons. One, the contract which was the basis of the expulsion of the contractor from the site has been held to be illegal and thus TANROADS could not have validly enforced a contract which itself knew or ought to have known that it was void ab initio. Claiming storage charges in these proceedings would be tantamount to enforcing a right from a non-existing contract. 15 Secondly, even if there was any such right to storage charges, the evidence in support is conspicuously wanting to sustain that claim. The only evidence adduced by DWl on this was to the effect that TANROADS had to foot payment of allowances to the police guarding the site simultaneous with fuel costs to ferry them to and from the site. DWl did not give any particulars of the number of policemen to whom his employer paid allowances neither did he provide particulars of the rate of the allowances alleged to have been paid as well as the costs of fuel said to have been spent in ferrying them to and from the site. Surely, DWl's bare assertions cannot sustain the Defendants' claim for storage charges. In any event such evidence is at variance with the reliefs in the counter claim where the Defendant claims storage charges at the rate of USD 500 for each of the 125 pieces of equipment from the date of expulsion to the date of judgment and later to the date of full payment. Making an allowance for the release of equipment on 13 August 2009 per exh. p 16 the cutoff date of the claim for storage charges ought to have been 13 August 2009 but as indicated earlier, DWl did not lead any evidence to substantiate that claim and the same stands rejected. Next I turn to the additional issues which the learned Senior State Attorney urged the Court to be part of the issues for the Court's consideration. I have examined the issues and I am satisfied that they are not necessary for the determination of the suit. Firstly, the issue of capacity to contract and validity thereof were dealt with by the DRE who recommended that the contract (exh. Pl) was void ab initio for lack of capacity. In view of my finding and decision when discussing the first issue 16 I ,. .\' ,, r, there will be no need for a further determination on the same issues in the instant suit. In other words, the issues are superfluous and it will be an academic exercise discussing them. The third additional issue seeks to discuss refund of advance payment but a clear examination of the record will reveal that it was dropped before my predecessor (Teemba, J) on 12 August 2014 and thus! do not see any relevance of that issue calling for the Court's determination in the instant suit. In the event and for the foregoing reasons, the Plaintiffs' suit is hereby dismissed so is the Defendant's counter claim. Since none of the parties has been successful in any of the claims, I order that each party bears own costs. Order accordi , -- '. j 16/12/2015 Delivered in court in the presence of Angela Lushagara learned State Attorney for the Defendants and in the absence the Advocate for the Plaintiffs this 18th day of December 201 --u JUDGE 17