BANK OF AFRICA T LTD VS ROSE MIYAGO ASSEA COMM CASE NO

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT PAR ES SALAAM COMMERCIAL CASE NO. 138 OF 2017 BANK OF AFRICA TANZANIA LIMITED.................. PLAINTIFF VERSUS ROSE MIYAGO ASSEA.............................................. DEFENDANT JUDGMENT (EX-PARTE) MRUMA, J. The Plaintiff bank brought this action inter alia to recover Tanzania shillings 101,651,444.55/= from the Defendant, general damages for breach of contract, costs of the suit and interest thereon. The claim of the Plaintiff is that sometimes in the years 2011, 2014 and 2015 the Defendant applied and was granted credit facilities of Tanzania shillings 100,000,000/=, 200,000,000/= and another 200,000,000/=respectively for purposes of financing working capital for the whole sale business of importing and selling garments and hand bags. The credit facilities were secured by a mortgage over Plots No. 662/1, 662/1 and 698/1 Block C Ukonga Sitaki Shari Ilala Dar Es Salaam owned by one Jimmy Brown Mwalugelo It is alleged that in total breach of the loan agreement, the Defendant defaulted payment of the loan and interest therein particularly the last loan facility which expired in April 2016. 1 After the default the Mortgagor was notified of the Defendant's default through a Statutory Notice dated 4th April, 2016. Neither the Defendant nor the Mortgagor complied with the 60 days Statutory Notice as a result of which the Plaintiff issued 14 days notice of intention to sale the Mortgaged properties. Still the Defendant didn't pay. The Plaintiff appointed GTL Best Group (T) Limited, the auctioneer to dispose of the mortgaged property. The property was disposed of in a public auction and it fetched T.shs 100,000,000/= It is the Plaintiff's case that after the disposal of the mortgaged property, the outstanding loan remained at T.shs 71,856,044.55/= which has continued to accrue interest and together with the auctioneer's fee which is 15% of the purchase price above T.shs 10,000,000/= and land rent fee for the suit property which is T.shs 1,075,400/= makes the amount outstanding to be T.shs 101,651,444.55 which the plaintiff is claiming in this suit. Summons to file a defence were issued and the affidavit of service is that of Athman Hassan Chama affirmed on 29th September 2017. It attaches a return of summons showing that the Defendant's whereabouts is not known. He deposes that on 29th September, 2017 he proceeded to the first Defendant's place of business situated along Kariakoo area but found that the place was closed. He proceeded to his resident at Mbagala Maji Matitu but he was informed that the Defendant was not known there. An application for default judgment was filed by the Plaintiff's counsel in court on 28th November, 2017. After going through the plaintiff's pleadings I found it pertinent for the plaintiff to prove he 2 claims by giving evidence. Indeed on 4th December 2017 two witness statements were filed to that effect. At the hearing the Plaintiff was represented by Counsel Stephens Aweso. The matter proceeded ex parte against the Defendant and in default of filing a defence. The facts relevant to the Plaintiff's claims are covered in the pleadings and witness statements and are considered in this judgment. The Plaintiff called two witnesses to prove her claims. There is only one issue and that is whether the Plaintiff is entitled to the prayers claimed in the suit. According to PW1 Mr Victor Paul Lewanga, the Senior Recovery Officer of the Plaintiff's bank in the years 2011, 2014, and 2015, the Plaintiff granted loan facilities to the Defendant for amounts of TZS 100,000,000/=, 200,000,000/= and 200,000,000/= respectively. The loan was to be repaid by equal monthly instalments of T.shs 5,000,000/=without failure. It is further evidence of PW1 that in the facility agreement letters the facility would attract interest at the rate of 23.5% per annum and a penalty interest rate of 32% per annum in case the loan tenure expires. The loan was secured by a third party mortgage over plots No. 660/1, 662/1 and 698/1 Block C Ukonga Sitaki shari Area, Ilala Dar Es Salaam owned by one Jimmy Brown Mwalugelo. The Defendant defaulted and sixty days notice of default was issued against the Mortgagor and the Defendant but nothing was rectified. The witness testified further that following the default fourteen days notice of intention to sale was issued and consequently the mortgaged property was sold at T.shs 100, 000, 000/=. According to 3 PW1 at the time of sale of the mortgaged property the outstanding balance was T.shs 171,856,044.55/=, thus after realizing T.shs 100,000,000/=from the sale, the remaining balance on the outstanding amount was T.shs 71,856,044.55/=. It is further evidence of PW1, that the Plaintiff is also claiming T.shs 10,000,000/= which is 10% of the purchase price which was paid to the Auctioneer for auctioning the mortgaged property and T.shs 13,000, 000/= which was paid to another Auctioneer who evicted the mortgagor from the mortgaged property after the auction. Further to that the Plaintiff is also claiming T.shs 1, 075,400/= being the arrears of land rent which had to be paid before the purchase could take possession of the auctioned property. 1. Whether the Defendant breached the contract with the Plaintiff? As stated at the outset of this judgment the suit proceeded against the Defendant in default of filing a defence. A default judgment could be entered against the Defendant summarily but as Section 110 of the Evidence Act [Cap 6 R.E. 2002] requires that he who alleges must prove, I found it pertinent for the plaintiff to prove her claims. From the evidence as adduced by PWlVictor Lewanga Senior Recovery Officer and PW2 Kasanga Nicholous Kaombwe Administrative Manager of the Defendant failed to repay the outstanding loan and according to these witnesses by April 2017 the amount outstanding was at T.shs 171,856,044.55/=. In terms of the facility letter dated 31st August 2015 (Exhibit P3), failure to pay any amount due constituted a breach of contract. Thus, on the evidence available this court finds that there was a breach of the contract by the Defendant. 4 As regards to reliefs the Plaintiff is claiming T.shs 101, 651,444.55/= being the remaining outstanding on the loan amount, Auctioneer's fees and Land Rent of the auctioned property. Careful consideration need to be given when determining the outstanding amount on the loan facility particularly court has to consider the wording used in the clause defining conditions and warranties. In the present case it is a condition agreed by the parties that all legal charges related to the transaction shall be borne by the borrower. However, it would appear that under Clause 3.01(a) of the Mortgage Agreement (Exhibit P4) it was agreed that the mortgage would secure "all monies obtained from and liabilities incurred to the bank notwithstanding that the ’ borrowing of such liabilities may be invalid or in excess of powers of borrower or any partner or credit of any one of such accounts in or towards satisfaction of any of the borrower's liabilities to the bank. The bank statement of the Defendant which was tendered as exhibit P8 shows that after the auctioning of the mortgaged property (i.e. the security), T.shs 100,000,000/= was credited into the Plaintiff's Account and by 2nd March 2017 the outstanding amount on the loan was T.shs 71,856,044.55/=. Thereafter, the defendant's Account was debited with several other entries including commission for public auction for the property and Land Rent, first instalment of instruction fees in recovery case against Rose Miyago Assea, 1st Installment Instruction Fees in Civil Case No 69 of 2017 between Jimmy Brown Mwalugelo Vs BOA Tanzania Limited etc. The bank argued that the facility letter covered all legal charges related to the transaction. I do not agree with this contention. Although the Plaintiff's bank may be entitled to recover some of the legal costs incurred in recovery measures, but at least not by dumping them in the Defendant's loan 5 account and treat them as part of the monies advanced to her under the facility letters tendered in evidence. Some of these costs for instance instruction fees are recoverable through presenting a bill of costs for taxation in accordance with th relevant laws. Some of them for instance instruction fees in relation to a case against one Jimmy Brown Mwalugelo cannot be recovered against the present Defendant. Secondly, as stated hereinbefore, the loan was secured by a mortgage over a landed property owned by a third party. By signing the mortgage agreement the Plaintiff's bank had accepted that the security was sufficient to secure all or such sums that would be due and owing by the borrower to the bank. Under Clause 3.0 of the Mortgage Agreement (Exhibit P4) it was agreed that the security was for unspecified amount which shall not at any time exceed the amount specified in the facility letter. The assumption here is that the value of the security was sufficient to cover the amount specified in the facility letter. If consequently it is found that the value of the security does not cover or it fall short the amount specified in the facility letter or if the bank disposes the security at the price less than the specified amount, then the bank has to blame itself for undervaluing the security either before accepting or at the time of sale. It cannot come back to the court to seek to recover the loan by other means other than the security it accepted. Thus, in the case at hand since the amount loaned plus accrued interest were secured by a mortgage deed (Exhibit P4) and as there is no evidence as to why the sale of the security by the Plaintiff's own Auctioneer and without involving the Defendant or the Mortgagor could not realize the amount to satisfy the outstanding loan, this court finds that the Plaintiff Bank is not entitled to the amount claimed in the suit. 6 It is high time now for the banks to be aware that once they decide to exercise their Statutory Power of Sale under the Mortgage Agreement and the sale does not realize the amount secured they cannot come to court with the view of having recovered the unrealized amount by attaching and auctioning other properties of the Mortgagor. Only the property mortgaged are liable for realization of the amount secured under the Mortgage Agreement and Facility letter concerned. Accordingly, Commercial Case No 138 of 2017 is dismissed. Order accordingly, A. R. Mruma, Judge Dated this 31st day July, 2018 7