bank of africa t ltd vs abdulsamad mohamed suleiman 2023 tzhc 20460 29 august 2023

THE UNITED REPUMlC OF TANZANIA judiciary IN THE HIGH COURT OF TANZANIA (MTWARA DISTRICT REGISTRY) AT MTWARA. CIVIL CASE N0.3 0F2020 BANK OF AFRICA (T) LTD............... ....................PLAINTIFF ABDULSAMAD MOHAMED SULEIMAN..,,...... ........ .DEFENDANT JUDGMENT WyS & 29/8 2023 LALTAIKA, X It is elementary economics that the four factors of production are land, labour, capital, and entrepreneurship. Apparently, many Tanzanians especially chose who grew up in the ujamaa era were instructed on a slightly different narrative. In Kiswahili the mantra went like this: "77/ tuendefee tunahitaji watu, siasa safi na uongozi bora." [Unofficial translation would be for us to develop we need people, good governance, and effective leadership]. Although the mantra was continuously hammered in the heads of the citizens-chiidren and adults alike, it was only half-truth. This is because, capital and entrepreneurship were downplayed, I will come back to this later. Page 1 of 34 In this suit, this court is invited to discuss the concept of capita! and, in some considerable length, charge as security for loan with particular emphasis to floating charge over stock and receivables. These are economic terms of art, but attempts shall be made to expound on them in plain English, For the same purpose, witnesses: shall be referred not only customarily as PW1 or DWI as the case may be but also by their names and, occasionally, their titles or positions in their respective companies. This will make it easier to follow the story and place it in its proper context. The plaintiff herein BANK OF .AFRICA (T) LTD has instituted this suit against the defendant ABDULSAMAD MOHAMED SULEIMAN claiming the following orders and reliefs: (i) Declaration that the plaintiff's interest on stock consignment/cashewnuts is.paramount. (H) Judgment in fa vour of the plaintiff against the defendant for payment of Tanzania Shillings: Three Hundred and Fifty Million (TZS 350,000,000) being current market value of the cashewnuts he. has sold. (iii) Interests at commercial rate on the claimed amount from the date of filing this suit to the date ofjudgment. (iv) Interest on the decretal sum at the court rate of 12% from the date of judgment to the date of full satisfaction, (v) In the alternative, an order that, the certificate of Titles on Plots No. 149,150 and 151, Block F, Msijute Area, Mtwara District be released to, the Plaintiff and the title thereto be passed to the Plaintiff. (vi) Genera! damages to the assessmen t by this Honourable Court (vii) The defendant to be ordered to pay the costs of this suit. (viii) Any other relief as the Court may findjust, convenient, and equitable to grant The factual and contextual I background leading to the suit are not difficult to understand. In 2017, the plaintiff which is a financial institution extended a loan facility to a company named OM Agro Tanzania Ltd (not a party to this case). The company defaulted to repay the loan. This loan was secured Page 2 of34 by among other things a first ranking debenture vtfhich was floating over ail assets of this company both present and future. Among those assets included a stock of cashewnuts as that was the major trading item and the company receivables. After defaulting to repay the loan, the plaintiff initiated demands to OM Agro (T) Ltd to repay the loan. The demand notes were not honored. When the plaintiff was preparing to initiate recovery measures; it learnt that the cashewnut stock had been moved by OM Agro to a different storage facility (known in Mtwara as godowns). Since the plaintiff had an interest in those stocks, it traced to where they were:taken to, and it found them locked down the godown where the consignment was taken to and placed security guards. The intention was to sell them to recover the loan. Before selling them, the defendant in this case emerged claiming ownership of those stocks. The genesis of the ownership as alleged is that the cashewnuts were given to him by OM Agro to repay a loan that he had extended to it (OM Agro). There was no consensus between the plaintiff and the defendant. He (the defendant) filed a suit before this court. This was On 19th September 2018. In diac suit (where he was a plaintiff) he claimed to have a paramount interest in the cashewnuts in that godown where the current plaintiff had put security guards. Tn defence the current plaintiff aiso claimed to have paramount interest. Along with that suit, the current defendant failed a Misc. Civil Application number 28 of 2018 seeking for temporary orders allowing him to sell those stocks because 'They are perishable in nature" pending Page 3 of 34 determination of the suit he had hied. The court granted the application that he should sell the stock but on condition that he had to deposit to the court an alternative security equivalent to the value of the in question. He did that. He brought three title deeds. These are certificate of title No 149, 150 and 151 Block F.. Msijute Area, Mwara District. After submitting the documents with the registrar, he was allowed to sell the cashewnuts. On the 1st day of hearing of that case instituted by the defendant (the substantive case on which the application was based) counsel for the defendant prayed for orders to withdraw his case. He was allowed to withdraw with leave to refile as he had something to correct from his pleadings. After withdrawal, the bank which is the current plaintiff felt that its loan is exposed. This means the plaintiff then how defendant would collect the title deed from the registrar because the application on which the titles were deposited was based on the withdrawn suit. Fearing its loan being exposed, the plaintiff filed this suit, and it also filed an application for temporary orders that the titles deposited with the registrar remain with him pending determination of this suit. It appears that not only were the titles already collected by the defendant but also the temporary application was not granted. The current suit is centered on who between the parties has paramount interest in the cashewnuts of OM Agro and why. In my opinion, this is an interesting suit that touches upon many issues in the world of capital, business, contract, and entrepreneurship. Page 4 of 34 Throughout the hearing of this chse> parties enjoyed skillfoi services of Messrs. Stephen Axwesso and Stephen Lekey learned. Advocates for the Plaintiff and Defendant respectively, I take this opportunity to register my sincere appreciations to the learned Advocates for their dedication and: commitment, as officers of the court, to assist this court in reaching a just decision. Skillful lawyers add the much-needed flavor to protracted litigation. The two Stephens deserve commendations for their unmatched composure: To pave the way for the hearing the two skillful lawyers and this court engaged in a very useful exercise of formulation of issues. It was agreed that the following issues guide this court: 1. Whether the plaintiff has an interest on rhe consignment in dispute 2. Whether the defendant has an interest in the consignment in issue 3. If issues number i and 2 ate decided in the affirmative, whether the plaintiff's interest is paramount to that of the defendant. 4. Whether the plaintiff was entitled to protect the consignment in dispute from being disposed and to what extent 5. If issue number 3 is decided in fa vour of the plaintiff, whether the plaintiff has a consequential interest on the title deed on plot number 149, 150, 151 Block A Msijute Area Mtwara District 6. Whether the value of the sold corresponds to the amount claimed by the plaintiff '/ To what reliefs are the parties en titled to. Pursuant to the principle obtained in our jurisdiction that he who alleges must prove (See section 110 of the Evidence Act Cap 6 R.E. 2019, as articulated by the Court of Appeal of TANZANIA IN BE RE LI A KA RANG I RANG I VS, ASTERIA .NYALAMBWA. Civil Appeal No 237 of 2017 (unreported) the ball was on the side of the plaintiff to prove existence of the facts alleged to enable this court to give verdict as prayed. In line with Page s of 34 the above, the plaintiff strutted two witnesses and tendered nine evidence s. The plaintiffs case is summarized below. PW1 was Joseph Bafcari- Mkonje a 42-year-old employee of the plaintiff. He deponed and testified that he had been employed by the plaintiff since August 2013 and works in the recovery department:. His responsibilities involve pursuing defaulters and making follow-ups. Mr. Mkonje detailed the nature of the relationship between the plaintiff and OM Agro. He clarified that OM Agro had applied for a loan to support its business, which marked the beginning of their relationship. He mentioned that while he possessed a copy of the letter, the Original was in the High Court of Tanzania, Commercial Division for another case involving OM Agro - After a protracted objection by Advocate Lekey, this court ruled in favour of the plaintiff and OM Agro's application letter for a loan from the Bank of Africa was admitted as an evidence and marked as Pl. . According to Mr. Mkonje, OM Agro had applied for a working capital loan of USD 500,000 and a Letter of Credit (LC) of USD 2,500,000. The Bank approved a loan amount of USD 3,000,000 based on their analysis of OM Agro's business. He referred to a Facility Lotter, which oudined the terms and conditions of the loan. He discussed the Debenture Deed, which secured the loan. He explained that the debenture was registered with BRELA (Business Registrations and Licensing Agency). He offered the Debenture Deed and Certificate of Registration as evidence in the case. Letter of Facility from Bank of Africa dated 9th October 2019 addressed to the Managing WV 34 Director OM Agro Tanzania Ltd bearing the loan facility of 3,000,000 were accordingly adrmtted arsd marked .as P2. Mr. Mkonje explained that OM Agro's primary business was buying and selling cashew nuts.: The Bank disbursed the loan to OM Agro, expecting timely repayment. However, OM Agro failed to repay a substantial amount, leading to growing interest and penalties. Mr. Mkonje mentioned sending demand notices to OM Agro and its directors. In the demand notices, Mr. Mkonje narrated, the Bank demanded payment of USD 1,09'6,541.72 from OM Agro. Demand Notice dated 5th June 2018 Addressed to OM Agro (Tanzania) Ltd was admitted and marked R4 The first Plaintiff's Witness (PW1) recounted how the Bank of Africa (BoA) initiated a process to retrieve and sell cashewnuts stored as collateral in order to recover the loan. He statod that upon reaching the MCC warehouse, where the cashewnuts were believed: to be located, they were not found. Subsequent search efforts led them to a warehouse branded as OM Agro, which was owned by Abdulsamad Mohamed Suleiman. Security guards were stationed outside this building in Mtwara on behalf of the Bank. Mr. Mkonje explained that the defendant claimed ownership of the cashewnuts, stating that he had lent money to Pratheesh Kumar Pillai, who failed to repay, leading him [the defendant] to take the cashew nuts. Despite the defendant's claims, Bo A maintained that the cashew nuts belonged to OM Agro, the company that had received the loan. During the inspection, Mr. Mkonje narrated that out of the total consignment of 138 tons, only 101 tons of cashewnuts were transferred from MCC to the OM Agro storage facility. Page i of 34 The value of these cashew nuts amounted to 400,000,000 Tanzanian Shillings. Mr. Mkonje clarified that the EJank intended to use 101 million Tanzanian Shillings to pay the cooperative society, with the remainder being part of the loan recovery process. To support this position, PW1 presented the Debenture Deed and registration certificate. The Debenture Deed and Certificate of Registration were admitted as evidence and marked as P3A and P3B respectively. The plaint and WSD were admitted and marked PSA and P5B respectively, Mr. Mkonje stated that the main case, denoted as Civil Case No. 6 of 201®, did not proceed to a hearing. Mr. Mkonje narrated further that the defendant then applied to the court, requesting permission to sell the cashewnuts due to their perishable nature. It required him to bring alternative security as the cashewnuts were going to be sold. He brough three title deeds for plots number 149, 150 and 151 Pleadings in Mine. Civil Application No 28 of 2018 were admitted and marked as P6. The court allowed him to withdraw the case, hut it did not explicitly address the fate: of the title deeds. The Court Ruling Dated 18th October 2018 HCT, In Misc, Cw Appl. 28 of 2018 HCT Mtwara District Registry was admitted and marked as P7. He conveyed that the ruling permitted the plaintiffs counsel to withdraw the case with the possibility of refiling it, although this refiling did not transpire. As a result, the bank suffered a loss because the case had centered around the cashewnuts, and the court needed to determine the destiny of the cashewnuts. The bank faced a dual loss: the security provided to the bank was sold, and the customer was unable to repay the- ’oan. Upon withdrawal of the case, Mr, Mkonje testified, the plaintiff expected the court Page & of 34 co address the. title deeds that had been submitted as alternative security. Mr. Mkonjr: explained that the bank faced a dilemma regarding how to proceed with the execution of the title deeds as alternative security. Mr, Mkonje clarified that Abdulsamad trad entered a separate agreement with a person called Pratheesh Kumar for the sale of cashewnuts, involving a loan of TZS 192,000,000 million. This agreement was distinct from the one between BoA and OM Agro. He asserted that Abdulsamad's allegations lacked credibility and that the bank had not prevented Abdulsamad's cashewnuts from being moved. The bank had placed security guards to protect the cashewnuts of OM Agro. Mr, Mkonje emphasized that Abdulsamad himself admitted that the cashewnuts belonged to OM Agro. He deemed Abdulsamad’s claim that the bank should compensate him to be without merit and suggested that Abdulsamad should bear the costs incurred by BoA due to his actions. Mr. Mkonje appealed to the court not to entertain Abdulsamad's requests, asserting that banks play a vital role m the economy by .lending'money. He stressed that the inability of a bank to: recover loans could have adverse effects on rhe economy, potentially affecting shareholders' investments and profits. The bank's decision to bring the case forward was driven by the concern that an individual's private lending agreement could lead to significant losses for the bank. During cross-examination by counsel for the defendant, Mr. Lekey, Mr. Mkonje recounted that the principal case, identified as Civil Case iMo 6 of 2018, did not proceed to a hearing. He detailed that on the day designated Page 3 of 34 for the scheduled hearing, the defendant, through his legal representative, applied for the withdrawal of the case with the intention of later refiling it. The court granted the request for case withdrawal, though it did not explicitly address the matter of the title deeds. The lack of a court ruling concerning the title deeds resulted in their withdrawal, which transpired on 15/8/2019 before Ngwembe X The ruling of the HCT, Mtwara District Registry, Dated 15th August 2019 before Ngwembe J was admitted and marked Evidence PS Mr. Mkonje clarified: that there was no distinction between the Debenture and the Letter of Credit in the context of formulating loan security. He explained that while the Facility Letter (P2) used the term "of portion financed by the bank through monitoring moder [floating charge], the Debenture Agreement (?3A) utilized the phrase "present and future" [floating charge]. He asserted that the implementation of the security was identical, and that the Debenture agreement did not alter or invalidate any aspect of the Facility Letter. He further specified that the Facility Letter was dated 9/10/2017, while the Debenture Agreement was signed on 9/11/2017, with the Facility Letter preceding the Debenture Agreement. Mr. Mkonje highlighted that the Facility Letter served as the basis for the creation of the Debenture Agreement, emphasizing that the terms and conditions of the Facility Letter were foundational. In. response to cross-examination questions fired to him, PW1 admitted they (meaning the plaintiff's staff) didn't address allegations of cashewnut P3gi* w -rs-'l shrinkage and decay in their pleadings. He mentioned that they had valued the cashewnuts at.400 million but hadn't presented the valuation report in court, He asserted that they hadn't mentioned the person who informed them about OM Agio's indebtedness. During re-examination PWi explained that the difference in the amount of the loan between the application and the facility agreement was due to the agreement initiating the relationship. This difference became irrelevant once the contract was signed, and it had not been contested since both parties signed it. He noted that in banking practice, the requested amount might differ from the granted amount. The second Witness was Mathias Tarimo, Manager in Credit Administration with tile Plaintiff. She mentioned that she joined the bank as a Graduate Trainee in 2013 and took tip her current position in 2020. Her responsibilities include entering credit-related information into the system and providing bank statements to various government agencies when leciuirad. Ms. Tarimo indicated that she possesses knowledge about the plaintiffs loan-related information. She was involved in printing bank statements for submission to the High Court Commercial Division. Specifically, she printed out a statement roi OM Agio, which encompassed both a loan statement and a current account statement. She clarified that: a current account statement displays transactions within the given account, whereas a loan statement presents Credit-related details. Ms. Tarimo identified the Page 11 of 34 document as a loan account statement, dated 25/9/2019, and explained that the original copy resides in the High Court of Tanzania Commercial Division. A ruling of this court resulted in admission of Statement of Account and Loans Statement of OM Agro Tanzania Ltd Account Number 05147980042 (USD Account) and 05147980067 (USD) and 05147930081 (USD) 05147980123 (USD) 05147980147 (USD) 05147980162 (USD) With The Bank of Africa (T) Ltd Printed out on the 25th September 2019 bearing transactions on loan from 29/11/2017 to24/9/2019 (2 pages for each account) Statement of Account Carrying the transaction: in USD from 29/11/2017 to 25/9/2019 05147980016 (printed out 25/9/2019 with a total of 18 pages). and marked as exhibit PSk During cross-examination by Adv. Lekey, Ms. Tarimo emphasized the distinction between a statement of accounts and a loan statement. A statement of accounts reflects a client's day-to-day transactions, while a loan statement pertains to a client's loan account and the disbursement of the loan. She acknowledged that the term "payment" in the context referred to payment to the beneficiary, which is not the client, but a third party mentioned in the agreement. Ms. Tarimo clarified that the name of the third party might not always appear in the client’s account. Regarding specific transactions, Ms. Tarimo noted that on 12/3/2018, a payment of USD 15,000 was made to Pratheesh Kumar, and on 21/3/2018, a payment of 1500 USD was made to one JUMA H. KILIMBAH, all during the loan issuance period prior to the default. However, she expressed her lack of knowledge concerning the co-directorship or roles of these individuals. A payment of USD 3628 to ACE Global Depository (T) Ltd on 8/3/2018 was Pag- 12 W 34 also mentioned/but she remained unaware of the contract and duties related to ACE Global Upon closure of the plaintiffs case,. Mr. Lokey took the podium for building the defendant's case and rebuttals in general. The defendant's case kickstarted with Abdulsasniad Mohemed Suleiman, a-59-year-old businessman and resident of Sokoni Area. Mfwara. He will be referred here as DWI sod Mr. •Suhiman. DWI mentioned having been in business for 27 years and shared information about OM Agro, a company engaged in purchasing crops from Tanzania, specifically from Mtwara, including cashewnuts and sesame. He clarified that he didn't have a very clear relationship with the company, but they occasionally borrowed money from him. According to Mr. Suleiman, OM Agro had borrowed money from him about four years ago, and he estimated that ovet the past six years, they had come to him for borrowing during both the sesame and cashewnut seasons, which were about six months apart in May and November. He mentioned that in the following year, the current Councilor Hassan from Ufukoni or Mbaye Ward had brought OM Agro to him. In this case, he indicated that it was the third agreement for money borrowing. He recalled that Mashaka, a signatory of OM Agro, accompanied by Hassan, came to him in June (although he was unsure of the exact year). He mentioned that he was preparing to travel to Muscat in Oman and that they arrived a day before his trip. Mashaka informed him about a consignment that needed money for clearing expenses related to the Dar es Salaam port. Mr. Suleiman suggested they consult the directors, including Page 13 rif 34 Pratesh arid Mzee Juma, for approval. He called his lawyer, Mr. Kulanga, who came to join the discussion. Subsequently, Pratesh and Mxee Juma arrived along with Mashaka and informed Mr. Suleiman that they needed TZS 32,000,000. Mr. Suleiman mentioned that he negotiated the amount clown from 100,000,000. They indicated that the security for the loan would be cashew nuts, stored in a warehouse owned by Lupanda at Chikongola. The agreement was that if they failed to repay the loan, the cashewnuts would become his property, arid they entered into a contract to that effect The Loan Agreement between Pratheesh Kumar Tipilai and Abdulsamad Mohamed Suleiman entered on 18th June 2018 was admitted and marked as Evidence DI. Mr. Suleiman emphasized that he extended the loan to OM Agro due to Pratesh's directorship in the company, as indicated in the agreement. Hie clarified that he recognized the people involved in the agreement because they all worked with OM Agro. He further mentioned instituting proceedings in this court in 2018, seeking permission for OM Agro to sell the cashewnuts due to their perishability. OM Agro assured the court that they would make the cashew nuts his property as part of their defense. Mr. Suleiman recalled that he didn't personally inspect the warehouse before lending the money due to his existing trust with OM Agro based on previous borrowings. He described instances of lending them money in the past using their Land Cruiser and later another vehicle as security. Regarding the repayment of the loan, he mentioned calling Pratesh upon returning to Tanzania and learning that Pratesh was traveling to India due Pag? 14 of 34 to his wife's illness. He was assured that Mashaka 2nd Juma would hand over Ln e cashew nuts, but they later informed him that the cashewnuts were not in the agreed warehouse. They mentioned that the cashewnuts were at MAMCU, and he visited the manager there to resolve the matter, Mr. Suleiman, DWI, mentioned that Mashaka had stated the purpose of their presence at the warehouse. He shared that when asked who he was, Mashaka explained that he was the person from whom they had borrowed money, and they were there to hand over the cashewnuts. The manager inquired about the whereabouts of Prathesh and Mzee Juma. Before he could respond, they informed him that the person authorized for the transaction was Miraji-. However, Miraji needed authorization from both Juma and Prathesh. A phone call was made, arid the manager spoke with Mzee Juma. Mr. Suleiman overheard Mzee Juma saying that he required authorization from Director Prathesh.. Despite multiple attempts, they were unable to reach Prathesh by phone. Eventually, through a WhatsApp video call at 5 PM, Prathesh allowed Miraji to take control of the situation. However, due to time constraints, ihey postponed the matter until the next day. The following day, Mr. Suleiman, along with Miraji and Mashaka, went to the warehouse. Miraji handed a note, similar to the one given at MAMCU, to a woman outside the warehouse. The woman mentioned that they owed Mr. Suleiman TZS 28,000,000. Miraji suggested that Mr. Suleiman pay the debt, which surprised him. Consulting his son, Abdulbasid Abduisamad, he concluded that he had already lent them TZS 92,000,000 and avoiding Page 15 of 34 paying TZS 28,000,000 was net going to help him anyhow, He agreed to pay the amount, but they refused bank transfers and insisted encash. After withdrawing TZS 35,000,000 from the bank, Mr. Suleiman paid off the debt of TZS 28,000,000, leaving him with TZS 7,000,000. They were then allowed to access the cashewnuts and pay laborers for loading and unloading the consignment. The condition of the cashewnuts was not satisfactory, with signs of spoilage, shrinkage, and germination. After consulting potential buyers, they decided to sort the cashewnuts and managed to sell a portion of them. Mr. Suleiman further mentioned the legal actions he took, including filing a case against OM Agro and IBoA, and seeking permission from the court to sell the cashewnuts. He explained that the court allowed him to sell the cashewnuts with a security'deposit of TZS 92,000,000, as per prevailing market practices. He indicated that: BoA initially refused to enter the appearance in court and continued to obstruct the selling process, tie delivered the court ruling to BoA s security officers at the warehouse. Court: Application for .Execution of Decree No 5 of 2018 dated 2nd of November 2018 was admitted and marked as Evidence D2. DWI detailed his interactions with BoA representatives, including Yohaha ChisimgL He acknowledged the loan agreements and debenture deed between him and OM Agro, signed by Prathesh Kumar Pilay. He mentioned his understanding of the agreements and the involvement of OM Agro in borrowing money. He recognized certificates of registration and 16 of 34 shac. d that he was familiar with the term "kwa niaba" in Kiswahili as a way of expressing representation. During re-examination by Mr. Axwesso, Mr/Suieiman stated that there was an agreement between him and Kumar regarding the OM Agro cashewnuts being handed over to him as security for a loan. He acknowledged that this was the sole agreement. However, when asked if the OM Agro board had accepted this arrangement, he replied that he had no answer for that. Mr, Suleiman recalled his actions when the bank indicated its interest in the cashewnuts. He reported the situation to the court, expressing his desire.to proceed with selling the cashewnuts due to the passing season. He explained that tire court imposed certain conditions, including the need for a deposit of cash equivalent co the value of the cashewnuts or another asset of the same value. He mentioned that he presented three title deeds as collateral, and after withdrawing the case, Tie retrieved one title deed while the other two were returned to their respective owners. He stated that he instituted a counterclaim against BoA after they initiated the matter. When asked if he claimed ownership of the cashewnuts due to an agreement with Director Kumar, he disagreed and asserted that OM Agro, represented by Director Kumar, had borrowed from him. He acknowledged that there was communication through a WhatsApp call with Kumar regarding the ownership of the cashewnuts, but lie had no documentary evidence of this. Page 17 of 34 Mr. Suleiman spoke about Mashaka, the signatory of OM Agrb’s bank account, and clarified that signatories of his companies were not necessarily shareholders but could be staff members. He mentioned Mzee Juma as one of the Directors but was uncertain about the full name. He acknowledged that he heard Kumar and Mzee Juma referring to each other as Directors. Regarding the quality of the cashewnuts, he stated that he learned about their condition from buyers to whom he sold the nets. He admitted not having produced an official report but had received oral feedback from an expert. He expressed uncertainty about whether the permit to remove the cashewnuts and proof of payment for storage were filed in court, as these documents were issued by his lawyer. Regarding the amount of cashewnuts, he admitted uncertainty about whether the agreed amount was the same as what he received, citing differences between the release order, the contract, and the warehouse inventory. He mentioned that he had told the court that some cashewnuts had started germinating but had no evidence to support this claim. Mr. Suleiman also mentioned that he had told the court that BoA Bank had no interest in the cashew nuts because they had not followed the proper procedure for their acquisition, although: he was unsure if this was a legal requirement. He emphasized that he had not been aware of the connection between OM Agro's loan and the- cashewnuts when he entered into the Contract. During re-examination by Adv. Lckey, Mr. Suleiman clarified that he possessed the ability to identify signs of burning of cashewnuts, which IS of 3.4 manifest as a black coloration. He could also discern germination through the appearance of small seedlings. In response to inquiries about whether Bans of Africa (BoA) received a copy of the court ruling, Mr. Suleiman referred to Evidence P7> which: displayed that BoA Bank was the first respondent and was represented, by Advocate John Mushn He recounted that on page 1 of the evidence , Adv. Magila informed the court that BoA had been served but declined to appear. The court then granted the request to proceed ex-parte. Regarding his encounter with individuals at. the BoA's office in Dar, Mr. Suleiman conveyed that the meeting occurred in 2018. He clarified that he had not encountered the person from Dar before or after that meeting and couldn't recall their names due to his anxiety at the time. Mr. Suleiman discussed various ways of purchasing or trading cashewnuts, including private businessmen purchasing directly from farmers and putting them in a warehouse, participating in market bidding through a letter of offer, or engaging in open bidding. Addressing the issue of assets deposited in a bank, he understood that such assets might limit obtaining loans from other entities. He mentioned a PDN (Permit Delivery Note), obtained from cooperative societies, which BOA had not provided, and that he wouldn't have been able to collect the cashewnuts if the agreement had been shared with these societies. Emphasizing his testimony given under oath, Mr. Suleiman confirmed that individuals such as Mr. Kumar, Mashaka, Hassan, Mzee Juma, and Miraji earns to him for a loan. Referring to Evidence P3, he observed the names Page 19 of 34 Pratesh Kumar and Mashaka Msumai as Director and Dircctor/Company Secretary respectively, in a document dated 9/11/2017. He Indicated that his contract with Mr. Kumar was likely in 2018, suggesting that P3 predates it. Regarding the resolution and power of attorney, he underscored that OM Agro, the second respondent, informed the court that they had borrowed money from him and requested to be discharged as they believed they had fulfilled their part of the agreement, Mr. Suleiman maintained that the agreement was indeed between himself and OM Agro, as explicitly stated. He emphasized that the stamp, used was that of OM Agro, and obtaining the cashewnuts without OM Agio's authorization was impossible, leaving no room for doubt on this matter. The second ■•defendant*’s- Witness DW2 wes •Hahtmiudu. Selemam Lupanda, se5Q~year-old businessman and resident of FFU Nandope Area (herein after Mr. Lupanda). Mr. Lupanda stated that the defendant (Mr. Suleiman) had been a former tenant at his warehouse situated in Chikongola during 2018. It was communicated to him thrl there was a need for a storage space for cashewnuts. An agreement had been reached regarding the recital cost, involving the defendant and another individual named Mashaka Msumai. Mr. Lupanda had known Mashaka from a previous interaction, where he had inquired about the. warehouse'. The tenant in question was OM A.gro, and Mashaka’s role was that of a director within the company. The exact season of this arrangement is not recalled. It should be noted that DW2 referred DWI by his first name Abdulsamad and this should not be confused with anyone else. Page 20 of 34 During the negot iation of the tenancy, Mashaka was the individual Mr. Lupanda had interacted with. The agreement was for a three-rnonth tenancy, presumably starting around September 2018. The keys to the warehouse were iseid by Mr. Lupanda’s warehouse supervisor named Moza Chinjalu. The monthly payment was set at seven million Tanzanian Shillings, Upon finalizing the agreement, DWI brought the cashewnuts to the warehouse four clays later. The exact date or signing the agreement is not precisely rem e m be red, but i t wa s I i ke I y i n J u n e. Mr. Lupanda recounted that when the cashewnuts were delivered to the warehouse, he happened to be in Dar es Salaam taking care of his wife. He received information from his warehouse supervisor that security personnel were guarding the warehouse. They had locked it and were providing continuous surveillance. Mr. Lupanda contacted DWI to share the news, and, in response, DWI pledged to address the matter legally. Around 2 PM on the same day, Abdulsamad confirmed that security personnel were indeed present at the warehouse. He assured Mr. Lupanda that he would pursue the situation through appropriate legal channels. After7 a few days, DWi informed Mr. Lu panda that a case had been filed in the High Court. DWI requested Mr. Lupanda's presence in court to provide testimony. Mr. Lupanda complied and appeared in court as requested, The court subsequently ruled in favor of DWI, granting him access to the cashewnuts. The security personnel did not resist the court order and departed from the premises. Meanwhile, as DWI was pursuing legal action, Mr. Lupanda returned to Mtwara to care for his mother. It was Page 21 of 34 during this period that DWI obtained: permission to remove the cashewnuts from the warehouse. Mr. Lupanda was still in Mtwara at that time. During the process of relocating the cashewnuts from the warehouse, it was observed that some of them had deteriorated and begun to germinate. After DWi decided to sei! the cashewauts, Mr. Lupanda, All Mwayunga, Mwantama, and others, including himself, became buyers. Around 28 tons were purchased at a rate of 700 Tanzanian Shillings per kilogram. The standard practice for purchasing the cashewnuts involved transporting them to a facility for measurement and processing. Mr. Lupanda clarified that he owed Abdulsamad a total of 21 million Tanzanian Shillings for rental fees. No payment had been made, and the debt remained outstanding. At the time when the cashewhuts were removed from Mr. Lu panda’s warehouse, approximately seven months had passed. Although Abdulsamad's initial warehouse agreement had been for three months, only an advance payment had been made. The monthly rate of 7 million Tanzanian Shillings persisted. Regarding the timeline, Mr. Lupanda indicated that the warehouse agreement had been established in June 2018. When the cashewnuts were brought into the warehouse, Mr. Lupanda was away in Dar es Salaam. This event also occurred around June. He concluded by noting that he possessed the original contract that had been entered into with DWI, During cross-examination by Adv. Axwesso, DW2 further stated: that he Was the owner of the warehouse where the disputed cashew-nuts were stored. He mentioned that the warehouse had been constructed in 2016 and F-ige 22 (?r 34 had various components such; as an office, main storage area, restrooms, and a smaller storage section. The building featured a large door and a ventilation system along the tops of the walls referred to as rovers. He explained that these openings were considered sufficient for proper air circuiation, as advised by building experts. He clarified that he did not build the warehouse exclusively for cashewnuts storage and was unsure about how long cashewnuts could be stored there. He acknowledged that he did not own a company himself but was aware that someone overseeing a company was called a director, while an owner was termed a shareholder. He stated that shareholders were required to be registered by the government and issued a certificate known as a shares certificate. Mr. Lupanda mentioned that he had previously referred to Mashaka as an owner of OM Agro, althougn he had not personally come across official records supporting this claim. He admitted to not having seen OM Agio's MEMATS documents. He clarified that his knowledge about Mashaka’s shareholder position was not solely based on overheard information; rather, he had encountered three individuals from OM Agro who introduced themselves as shareholders. However, he had not seen any supporting documentation. He stated that his client list comprised only OM Agro and DVV1. He indicated that he did not have the tenancy agreement document with him and lacked evidence to prove its existence. He mentioned that he had been introduced to DW1 by Mashaka during the signing of the tenancy agreement. He noted that his responsibilities did not include overseeing consignments. Page 23 of 34 Regarding the events when the cashewnuts were brought to his warehouse, he explained that he was in Dar es Salaam and had stayed there for about a month. He had left for Dar a few days after signing the agreement, approximately two ■ -meks later. He acknowledged that he was not present when the warehouse door was locked by askaris. He conceded that his staff could provide better details about the incident. Mr. Lupanda explained that the agreement stipulated a three-month lease term, and he initially received payment for only three months. He clarified that the total owed to him was 56 million minus 3 million, resulting in 53 million TZS. He mentioned that he had not been paid until January, and he had expected BoA to have collected the cashewnuts by the end of December. He stated that, in his understanding, this extended to January, and he noted that BoA had already distanced themselves from the situation. During reexamination by Adv. Lekey, DW2 identified the document as the plaint in Civil Case No 6 of 2018, which he had signed, The deponents named in the document were Abdulsamad Mohamed Seleman and Mahamudu Selemani Lupanda. He acknowledged that he had appeared in court to provide testimony in that case. His testimony had focused on the fact that DW1 had delivered a consignment to his warehouse, and Abdulsamad was the individual he had recognized. He also mentioned that he had previously affirmed or taken an oath, though he couldn't recall the exact details of that process. His presence in court was linked to the case as indicated by Evidence P7, the. ruling on Misc. Appl. No 28/2018. S'Wi’?. 24 oi 3*1 Referring to page 16 of the document, DW2 narrated that it was stated that DW1 .could retrieve the cashewnuts upon fulfilling the conditions set by the court. He expressed that if BoA had allowed this to transpire, it would have resulted in a peaceful resolution. The consignment could have- been collected without conflict. They had returned to court for execution purposes In order to maintain the peace. Given tlpresence of security guards, they required police assistance, which was why they sought the involvement of the police. He emphasized that the order had specified that the police should accompany DW1 to ensure peace. Having jydtoiously recorded both the psaintiiff's and defendant's cases through their respective witnesses as led by the learned Advocates, I am now in the position to embark on a legal reasoning journey to the verdict. Appreciably, pursuant to the order of this court dated 15th day of June 2023, counsel discharged their obligations for final written submissions as scheduled. Needless to say, such submissions were highly insightful and have greatly added value to this judgement. As prefaced, the four factors of production are land, labour, capital, and entrepreneurship. During Ujamaa capital and entrepreneurship were downplayed. We may probably need to go back to the drawing board, This s because, without capital, land (and ail natural resources attached to it including minerals, oil, and gas) remain less useless. Likewise acquisition of capital is essential for unlocking the human resource potential. The potential of our highly trained engineers, for example can only be realized if they can put their knowledge and skills to proper use. In short, the importance of Page 25 of 34 capital for social-economic development of any country cannot be overemphasized. The main method used by individuals, companies and even states to meet their capital requirements is through loan finances. The main lenders are commercial banks such as the plaintiff. Although the doors of these financial institutions are always open (and customers are more often than not spoiled for choice with numerous arrangements), their main concern is to ensure that such loans are offered against a security that guarantees repayment. Commercial law scholars and practitioners agree that traditionally there are three main forms of security namely mortgage, pieclge, and Siens. The fourth form of security namely charge was born out of necessity. Charge as security was created by courts in England hi the :19th century asa result of high demands in capital during the industrial revohition (See Butter M, 'Recognition of English Fixed and Floating Charges in German Insolvency Proceedings under the New European Regulation on Insolvency Proceedings' (2002) 2 Journal of Corporate Law Studies 213). Legai historians agree that courts had to intervene because of inefficiency created by mortgage, pledge, and liens particularly lack of flexibility. The term charge as used here is not coterminous with charge in criminal law. This is simply an agreement between a bank and a company which gives the bank certain rights over the assets of the company. According to Bromford, charge is the dedication of a property to- a Pag? 26 of 34 performance of a. specific obligation (See Colin Bamford, Prfac/p/e& &f TntemationaLFinancial La w {2r\6. edition, Oxford Publications 2015). Charges are divided into fixed and floating. The case of Hakody v. Marshal (180) 10 HOC .1, 191, 11 E.R. 999 is considered the landmark decision which led to recognition of floating charge. Eight years later in the case of Panama, Hew Zealand, add Australian Royal Mail Company limited [1.870] 5 Ch App 318, came before the Court of Appeal in Chancery. A steamship company had issued debentures charging its "undertaking" to secure the amounts payable under the debentures, It was held that the word "undertaking" referred to ail present and future property of the company and the company was entitled to deal with the pro pert?/ in the ordinary course of its business until the moment it was wound up. Recognition of floating charge is considered one of the most revolutionary innovations in the 19th century's financial arrangements. Companies could now secure loans without parting with the assets that they needed for their production. This means one did not heed to surrender a copy of title deed (mortgaged land) make a pledge or make an offer for a lean. In the remarkable decision in Re Yorkshire Wool Combers Association [1903] 2 Ch. 284 at 295 Roma J. provided for three fundamental features of a floating charge. First, it is a charge on a class Of assets of a company present and future. Second, if that class is one which, i n th e o rd i n a ry co u rse o f th e b u si n ess of th e co m pa n y, would be ch a ng i n g from time to time. Third, until some future step is taken by or on behalf of Page 27 of 34 those interested in the charge, the company may carry on its business in the ordinary way as far as concerns the particular class of assets it is dealing with. It should be noted that the phrase dealing, with the property "in the ordinary course of its ..business" did not bar the debenture holder from pursuing her property righto to the floating charge whenever there was a "pressing need" to do so. Nevertheless, in spite of all the advantages, recognition of floating, charge as security was not well received by some scholars and even some judges mainly for interfering with rights and interests of third parties. It also did not go well with "received wisdom" in insolvency law. In that regard, for example, in the case of Re Spectrum Plus Ltd [2005] UWL 41 at paral30 Lord Walker described floating charge as a cuckoo in the mest of corpo rate insolvency-. Coming back to the matter at hand, I will respond to the issues hitherto agreed with Counsel to lighten our way through reasoning. I in! end. not to labour much on. the first and second issues. Apparently the first issue is to the affirmative. The plaintiff had interest in the consignment of the cashewnuts in question. As strangely as it may sound, the defendant too had interest in the same simply because, as claimed by DW1 he had lent money to OM Agro who "owned" the cashewnuts. I have no hesitation in putting a check mark for each of the two issued so as to move on to the third and fourth issues which, in my opinion, are the main preoccupation for this suit. The third and fourth issues os agreed earlier provide that "3. If issues number 1 and 2 are decided in the affirmative, whether the plaintiff's interest Pa^> 2.8 n 3-1 zs paramount to that. of the defendant. I Whether the plaintiff was. entitled to protect the consignment in dispute from being disposed and to what extent. " This logical flow allows me to come back to the concept of floating charge alluded to above but this time zooming in to the position of our law. Our company law is very clear on how companies in our countries conduct their businesses. Before I examine the rights that emanate from the floating charge over stock created for the benefit of the plaintiff, I wish to state albeit in passing that I find it very strange that the defendant insists that he advanced a loan of 92,000,000/== to a company OM Agro and not to individuals. In his narrative the directors of OM Agro had been his clients whenever they needed money. I think this is not the way to goiri conducting business. Our country does hot need strong individuals who can simply issue a ninety-two million shillings cheque to a ''company" without conducting any due diligence. It needs strong institutions committed to business growth and expanding opportunities for ail. The relationship between the plaintiff and OM Agro the undisputed owner of the stock in question is very clear. They had entered into a loan agreerTient. More importantly, this loan was secured by among other things a first ranking debenture which was floating over aH assets of OM Agro both present and future. Premised on the nature of floating charge discussed above with the aid of case law which, I have no hesitation in making a finding that the plaintiff's interest in the stock is paramount. The defendant was duty bound to undertake a due diligence before advancing a loan to a company whose assets present and future had been "dedicated" Page 29 of 34 to some other entity as security. The reasoning behind the phrase caveat emptor (buyer beware) applies here albeit from a slightly different angle. On the fourth issue, I must admit that the extern to which the plaintiff can protect the consignment from being disposed and to what extent goes contrary to "received wisdom'' in contract law and msolvency. Nevertheless,, so much ink has been spilled debating the merits of floating charge over and above, for example, privity of contract. In the instant matter, the loan agreement that led to the debenture deed was between the plaintiff and OM Agro. Ordinarily, the defendant is out of picture. The plaintiff could simply be dismissed and advised to pursue his interests from the 'Tight party". Unfortunately, the law on floating charges which is a corner stone of expansion of businesses does not accept that simplicity. It is well established that a company in whose favour floating charge is created can protect its proprietary rights without any limit subject only to the terms and conditions that create the charge. For example, in the present case, the plaintiff was willing to compensate the defendant known in business circles as 'kugawana hasera" to th<e tune of TZS ~ I think.this was a lucrative deal had the defendant been properly advised on the nature of floating charge over stock as security. It isn't that different from liability arising from buying property suspected of having been stollen. The fourth issue is therefore answered in the affirmative. With regards to the fifth issue, without prejudice to decisions of this court on the matter, going by the strict position of the law related to floating: lUr? 30 34 charge, it was illegal ab initio for the defendant to deal with the cashewnuts stock especially. when it was repeatedly brought to his attention that the purported "owner" had defaulted repaying their loan. Nevertheless, it is a functus officio for this court to dealt with the issue as. alluded to above. The fifth issue is, therefore, answered in the affirmative to the extent of the disclaimer. On the sixth issue, the plaintiff who is a specialist in financial matters as her main business has claimed Three Hundred and Fifty Million (TZS 350,000,.000) being current market value of the cashewnuts. The defendant, who during cross examination jokingly denied having any knowledge of cashewnuts business even though he later clarified that his response was inline with the "obvious" questions by counsel for the plaintiff trunks the amount is not justified. I must be pragmatic here. On a balance of ptobabii ities, the plaintiff has made a convincing case that the value is for the current market price. The defendant's assertions that the cashewnuts were sold at a throw away price of TZS 7000 per kilogram is not only without proof but also, frankly, the case of volenti non fit inuria albeit in a slightly different angle. To be even more practical, the plaintiff shall stick to the figures given because the word "current7'is organic. If care is not taken to employ clarity, that is, if the "current market price" is left open ended, theamount can easily quadruple in a few days due to the ongoing global economic challenges. Be it as it may, the amount is only a tiny fraction compared to the amount of loan issued to OM Agro as per the pleadings. Page 31 of 34 Before I pen clown, I am inciined to state that, like England during the first industrial revolution, Tanzania is poised for growth. Businesses are on the lookout for breakthroughs to widen their horizons. Without deliberate efforts to attract capital and investment, the country's potential in agriculture in general and cashewnuts export, in particular, to mention but one area of ''comparative advantage" in our regional block, will continue to be an economic disappointment. Courts in pur country, therefore, like their counterparts in England in the 19 th century, must inspire confidence among banks awl other financial institutions that floating charge over stock and other assets is enforceable. To ensure economic growth, interest in new forms of security in addition to well-known ones particularly mortgage, pledge, and lien, must be jealously protected even against seemingly innocent third parties. It is imperative that our businessmen and women through local chapters of the Chamber of Commerce and other avenues, are alerted on the dangers of engaging in business without conducting proper due diligence of the potential client. Public policy requires that loans are repaid-on time. Moreover, when banks and other financial instructions facilitate economic projects through issuance of loans, it is important to ensure that such loans are used for the purpose intended. This is how to get the wheels of the economy moving forward through maximum utilization of the power of capita! and entrepreneurship as the (hitherto neglected) factors of production. Page-32o.f 34 This brings me to the orders and reliefs. Premised on the finding that the plaintiffs interest overstock is paramount, defendant's counterclaim is hereby dismissed without costs. I proceed to make the following orders/ reliefs: (<) The defendant is ordered to pay the plaintiff a total of Tanzania Shillings Three Hundred and Fifty Million (TZS 350,000,000) being current market value of the cashewnuts he has sold. GO Interests at commercial rate on the claimed amount from the date of filing this suit to the date of judgment. (iii) Interest on the decretal sum at the court rate of 12% from the date of judgment to the date of full satisfaction. (iv) Costs of this suit. Judgement delivered this 29th day of August 2023 in the presence of Adv. Lightness Kikao holding brief for both counsel for the Plaintiff Mr. Stephen Axwesso and for the Defendant Mr. Stephen Lekey. JUDGE 29.03.2023 Page 33 of 34 Court The Right to appeal to the Court of Appeal of Tanzania fully explained. Pag'-? 34 of 34