20110330 TZHC Dar es Salaam

IN THE HIGH COURT OF TANZANIA (DAR ES SALAAM DISTRICT REGISTRY) l

AT DAR ES SALAAM CIVIL REVISION NO. 62 OF 2009 (Originating from Ilala District Court at Samora Avenue, Civil Case no. 167 of 2009) BANK OF AFRICA .......................................... APPLICANT

VERSUS BERNARD ANTHONY CARLOS ................. 1sT RESPONDENT HARVEST TANZANIA LTD ........................ 2No RESPONDENT RULING· MURUKE,J. The applicant in this application has moved the court under section 44(1 )(a) and (b) of the Magistrates' Courts Act Cap. 11 R. E. 2002 asking for orders among others: I. That this honourable court be pleased to call for the record, examine the appropriateness, regularity of" the proceedings and the manner under which the trial magistrate conducts the proceedings in civil case no. 167 of 2009.

2. That this honourable court be pleased to revise the proceedings, ruling and orders delivered on 15/1212009 by quashing and setting them aside. The trial court's records indicate that on 15/12/2009, the 1st respondent filed civil case no. 167 of 2009 for orders restraining the applicant from interfering with the 1st respondent's shop together with a chamber application requesting st for interim ex parte orders requiring the applicant to re-open the l respondent's shop and restraining the applicant from selling by auction the l st respondent's shop items pending determination of the main application inter partes. The ex parte application was granted accordingly on reasons namely ~ 1 (a) Consignment locked in the shop were intended to be sold during the Christmas season and if not sold the applicant would suffer loss; st (b) The 1 respondent's important documents used in his daily business operations were locked in that shop thus the 1st respondent will be hand capped in his daily business activities. The applicant was aggrieved by that decision and rushed to this court applying for revision. The applicant maintained that the ex parte orders were issued without reasons and as a shield to bar the applicant from exercising its rights under the loan agreement, at the same time, giving unjustifiable chance to the 1st respondent to sell the hypothecated goods in the shop which are

the only security for a loan advanced to the applicant. The applicant contended further that the trial court didn't take into account the fact that the applicant's head office is located at NDC Development House and all its operations are within the City of Dar es Salaam. Apart from filing counter affidavit to the application for revision, the 1st respondent lodged his chamber application under section 68(e), order 37 rule l(a) and section 95 of the Civil Procedure Code, Cap. 33 R. E. 2002 (the CPC) for orders as those already issued by the trial Court as follows: That this honourable court may be pleased to grant an interim order directing the respondents, their agents or servants or any one acting under their instructions to reopen the applicant's shop premises located at Raha/Muhonda Street Kariakoo and restrain them from selling or inte1fering with the applicant's business activities in the shop pending hearing of this application inter-partes. The 1st r~spondent said he was obliged to ask for that order in this Court because the trial court's orders weren't executed, the original file having been forwarded to this court in determination of civil revision no. 62 of 2009. He was emphatic that if this court can not grant his prayers and instead revises the trial court's orders, he will be stranded and incur loss together with his fan1ily as they solely depend on the shop at

issue as a means of livelihood and that some of his important documents are locked in the said shop. From the affidavits and counter affidavits of the applicant and the 1st respondent, the following facts are not in dispute. In March 2009, a loan facility 2 of Tshs. 35,000,000/- was advanced by the applicant to the 1st respondent on terms and conditions contained in the facility, on pay1nent of a 1nonthly installment of Tshs. 4,550,000/- for a period of six months. The loan was secured by a letter of hypothecation of the applicant's goods dated 19/4/2008. The 1st respondent failed to service the loan as agreed. Consequently the applicant appointed the 2 nd respondent, its outsourced debt collector, to follow up payment of the loan money from the 1st respondent. The 2 nd respondent acting for the applicant locked the 1st respondent's shop at Kariakoo with intention of selling the items contained therein to realize the loan advanced. It is at this point the applicant instituted civil case no. 167 of 2009 and the accompanying chamber application in the trial court. The 1st respondent has contended in his affidavit that his failure to service the loan in terms of the loan agreement was caused by constant breach of the loan agreement by the applicant including offering of a lesser amount than the one agreed, and its imposition of new terms and conditions of the loan without notice

to the 1st respondent. On the other hand, the applicant has asserted in the counter affidavit that its decision to appoint the 2 nd respondent was incited by the 1st respondent's breach of the loan agreement through his failure to serve the loan as agreed and by denying the applicant its right under the loan agreement to enter the place where the hypothecated goods are kept and retain possession thereof. The application was argued in writing by Jamhuri & Advocates for the 1st respondent and by F. B. Attorneys for the applicant. I have noted that both counsels have addressed this court on the 1st respondent's application for an interim injunction order and not on the application for revision; however, given this court's powers to act even suo moto under section 44(1)(a) of the Magistrates' Courts Act, I will deal with both applications. The 1st respondent has insisted in his submission that the shop in dispute is the only means of livelihood for him and his family and its locking has caused and st it is still causing loss to the 1 respondent. Giving an instance of his request for Tshs. 25,000,000/- in 2009, his subsequent withdrawal of Tshs. 15,000,000/- and bank's utilization of the Tshs. 10,000,000/- balance to 'settle the 1st 3 respondent's previous loan facilities without notice to the 1st respondent. It is the applicant who is in breach of the sale agreement by offering lesser amounts. 1st respondent invited the court to follow the principles laid down in ATTILIO v. MBOWE (1969) HCD no.

284. It has been argued for the applicant that the respondent has been the one in breach of the loan agreement by failing to repay the loan. The applicant's counsel submitted that the criteria in ATTILIO v. MBOWE have not been met hence the application for temporary injunction cannot be granted. He contended that since the 1st respondent is complaining about the applicant's exercise of its contractual rights under the loan agreement, then there is no any triable issue because 1st respondent has failed to demonstrate beyond his mere assertions that the applicant breached terms of contract. He cited the case of TANZANIA COTTON MARKETING BOARD v. COGECOT COTTON CO. SA [1997] TLR 63 contending that in these kinds of application the applicant has a duty to go beyond mere assertions that he will suffer great loss and that his business would be brought to a standstill, the duty that the 1st respondent has failed to discharge. In dealing with the 1st respondent's application for an interim injunction order, the 1st question to be answered is whether this court has powers to grant the 1st respondent's prayer if what is sought is the same as that which he requested and granted by the trial court. In determining a question identical to the one posed, the Court of Appeal of Tanzania had the following view in UDSM v. SILVESTER CYPRIAN & 210 OTHERS [1998] TLR 175 at page 180: "We have asked

ourselves whether this court can grant the applicant's prayer if what they seek is the same as that which they sought .from and refused by the full bench in the preliminary objection in Civil appeal no. 2 of 1995. The answer must be in the negative because firstly, that the matter is already res judicata ... " st Flowing from the Court of Appeal's decision, it is my view that the 1 respondent's prayer is res judicata having been applied for and granted by the trial court. Such an application is misconceived and can't be granted at this stage. 4 As rightly submitted by both parties, the law with regard to granting of temporary injunction is now well settled in our country; and here I refer to the highly celebrated cases of ATTILIO v. MBOWE (1969) HCD no. 284 and GIELLA v. CASSMAN BROWN & CO. LTD [1973] E. A.

358. In the case of GIELLA, the Court of Appeal for Eastern Africa phrased the conditions for granting of temporary injunction as hereunder: "First, the applicant must show a prima-facie case with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages. Thirdly, ff the court is in doubt, it will decide an application on the balance of convenience". The second question then, is whether the circumstances of this case satisfy the conditions in ATTILIO v. MBOWE and the GIELLA case. I will start with a question whether the applicant has established a prima-facie case. In determining this question, courts have to look on the facts proved by affidavits of the parties or otherwise to see whether there is a substantial claim to be tried as clearly stated in Mulla, The Code of Civil Procedure, 16 th Edition, Vol. 4, Butterworths, New Delhi at page 3717. As already shown, the 1st respondent's main complaint is against the applicant's act of locking his shop at Kariakoo with an intention to sell the items contained therein. The 1st respondent has however conceded in paragraphs 3 and 4 of his affidavit that he took loan from the applicant and didn't service it according to the agreed terms. The applicant, on the other hand, has

disclosed in paragraph 4 of his counter affidavit that the letter of hypothecation of goods securing the loan allowed the applicant to enter a place where the hypothecated goods are kept and retain possession thereof or sell the goods in case the 1st respondent failed to service the loan. Under paragraph 7 of the letter of hypothecation of goods the 1st respondent agrees as follows: "7. The bank may sell the possession at, seize, recover, receive, remove and/or otherwise dispose of or deal with all or any part of the goods hereby hypothecated, charged and mortgaged (without demand of payment or price) in such manner the bank in its absolute discretion may think fit and without responsibility for any loss in connection therewith in any of the following events: 5 a) ... ; b) On the undersigned failing to pay on demand any advance made by the bank or to pay any other indebtedness to the bank for me/us the undersigned with all interest, commission and other charges in respect there at; c) if and when the bank consider it desirable so to do having regard to the market value of goods whether or not any contingent or other liability to the bank of me/us the undersigned, shall have actually matured" The facts I have summarized reveal that the applicant had right under the letter of hypothecation of goods, the 1st respondent having failed to repay the loan, to take possession or recover

hypothecated goods in the 1st respondent's shop and dispose it to recover the loan money. Therefore, the legal process can't be used - by borrowers to evade repayment of the loan advanced to them. In the case of AGENCY CARGO INTERNATIONAL v. EURAFRICAN BANK, CIVIL CASE NO. 44/1998 (unreported), this court said: "In order for a bank to continue being in banking business, it must have funds to lend and which must be repaid by its borrower. !fa bank does not recover loans it will surely be an obvious candidate for bankruptcy" I am aware of the 1st respondent's contention that his failure to pay the loan as agree was caused by the applicant's breach of the agreement by offering lesser amounts of money than that applied for and by constantly changing terms of their agreement, but, I find the same unsupported. The 1st respondent hasn't produced any document to support his assertions. He had to go beyond mere assertions to prove that the applicant breached the agreement. I-Iis admission on failure to service the loan, prove that he is the one in default. Granting of temporary injunction in such circumstances court will be interfering with the parties' contractual rights and obligations thereby unjustly injuring the other party. In the case of GENERAL TYRE EAST AFRICA LTD v. HSBC BANK PLC [2006] TLR 60 at 68 Sheikh J held that: /'The court's jurisdiction to interfere in the case of a

contract by granting an interlocutory injunction is limited to cases where it is clear that a breach must result_ft,om the acts of the defendant" 6 In the case of ALLY SALEHE v. KWAHESHWA A. R. MISHARA & ANOTHER, MISC. CIVIL APPLICATION NO. 30/2011 (unreported) that: ,J "To grant injunction against the lender enforcing security to recover loaned amount, not only is to interfere with the express contractual terms between the lender and borrower, but courts will act as a bushfor defaulting borrowers to hide. In the instant case, the applicant's exercise of his contractual rights by locking the 1st respondent's shop with intent to sell the hypothecated goods can not result in a breach of terms of the loan agreement. The 1st respondent's claim is therefore frivolous and vexatious and in that case I am unhesitatingly saying that a prima-facie case with probability of success hasn't been made. I again concur with the applicant's counsel that the 1st respondent has also failed to demonstrate the kind of irreparable injury to be suffered that can't be compensated by an award of damages. The 1st respondent has stated in paragraph 14 of his affidavit that if his prayer is not granted and instead this court revises the trial court's ex parte ruling and order, he will be stranded together with his family who solely depend on the shop in dispute as a means of livelihood. Is that a type of

injury contemplated in GIELLA case? I definitely disagree. The 1st respondent has failed to specify details and particulars of loss that can be incurred. In TANZANIA COTTON MARKETING BOARD v COGECOT COTTON CO. SA [1997] TLR 63 the Court of Appeal of Tanzania ruled at page 66: "In my considered view, this is quite clearly unsatisfactory. As it was held in the case of Bansidhar (supra) unless details and particulars of loss are_spec~fied there is no basis upon which the Court can satisfy itse(f that such a loss would really be incurred by the applicant'' It follows that this court has no basis upon which to establish the kind of irreparable injury the 1st respondent will suffer if the prayer for temporary injunction is refused. Having found that the first two criteria for granting temporary injunction as established in ATTILIO and GIELLA cases suppra haven't been satisfied, I will not labor on the 3rd criterion and it is my holding that this finding would fail the 1st respondent's application even if the smne wasn't res judicata. The 1st respondent's application is struck out with costs. 7 I now turn on the grounds of revision as presented by the applicant. The applicant's main point in support of his application is that the ex parte interim order was issued without sufficient reasons and notice to the applicant and was intended to allow the 1st respondent time to sell the

hypothecated goods in the shop which are the only security for a loan advanced to the applicant. The 1st respondent's application for interlocutory orders was filed in the trial court under sections 68(e), 95 and order 37 rule l(a) of the CPC. Section 68(e) of the CPC reads as follows: "68. In order to prevent the ends of.justice from being defeated the court may, subject to any rules in that behalf- (e)make such other interlocutory orders as may appear to the court to be just and convenient" As it can be seen, powers of the courts to issue interlocutory orders are not absolute, they are subject to 'any rules in that behalf'. Among the rules contemplated under section 68(e) are those under order 37 of the CPC. Order 37 rule 4 of the CPC provides: "The court shall in all cases, before granting an injunction, direct notice of application for the same to be given to the opposite party, except where it appears that the giving of such notice would cause undue delay and that the object of granting the injunction, would thereby be defeated" Sarkar, S. and Manohar V. R. when considering scope and application of order 39 rule 3 of the Indian Code of Civil Procedure which is in pari materia to our order 37 rule 4 of the CPC in their book Sarkar's The Law of Civil Procedure, 8 th Edition, Vol. II, 1992, Wadhwa & Co. Law Publishers say at page 1440: "While considering an injunction matter

court should not act casually and in a cavalier fashion but pass orders only afier adverting to all facts and circumstances of the case (P Chidanbaram v. Joint civil Judge, A 1986 G. 17). Provision for issuing notice to the opposite party while granting temporary in;unction is mandatory (Industrial C and D v. B Surya Narayana, A 1986 Kar 98) ... Only in execeptional cases, for very good reasons to be recorded by the court, an exparte order of grave nature could be passed (P Chidambaram, General Secretary, Gujarat Mazoor Panchayat v. Joint Civil Judge (JD) Naro!, Ahmedabad, A 1986 Guj 17, 18)" 8 • C Applying the prov1s10ns of order 3 7 rule 4 of the CPC in the case of AUGUSTINO LYATONGA MREMA & 2 OTHERS v. ABDALLAH AJENGO & 2 OTHERS [2001] TLR 67 at page 72 - 7, the Court of Appeal of Tanzania held: "The effect of rule 4 of order 37 is to make it compulsory for the giving of notice to the opposite party in all cases except in situation covered by the exception to the rule. In the Noor Mohamed case referred to by Mr. Magesa, it concerned order 39 rule 3 of the Kenyan Civil Procedure Code in pari material with our order 3 7 rule 4, the Eastern Africa Court of Appeal stated, afier quoting rule which is identical to our rule 4: 'The requirement to give notice is clearly mandatory and it can not be disputed that the onus of satisfying the court that there is good cause for dispensing

with it will lie with the applicant. In the instant case, the respondent's summons did not contain any reference to rule 3 nor any application for the order dispensing with notice and the only paragraph of his affidavit which could be prayed in aid of the immediate issue of an injunction is paragraph 10 which contain the bold assertions that the furniture, goods and effects are in danger of being wasted or wrongfully sold in execution' That case is in all-fours with the case before us. It was up to the applicant to satisfy the court that there was a good cause for dispensing with the mandatory requirement to serve the notice of the application to the appellants. Not only did the respondent's chamber summons/ail to refer to rule 4, but the I~' respondent's affidavit contained no grounds/or dispensing with such notice. Without the respondents satisfying the court as to the necessity of dispensing with the notice under rule 4, the court had no power to grant exparte the injunction against the appellants" In this case, the trial court issued an ex parte injunction without notice to the applicant. There was no application under rule 4 of order 3 7 of the CPC for the order dispensing with notice to the applicant and further the I st respondent's chamber summons in the trial court didn't refer to rule 4. The only reasons for such an ex parte order to be fetched from paragraphs 7 and 8

of the I st respondent's affidavit in the trial court are that locking of the shop has caused loss to the I st respondent it being his sole means of livelihood and locking of the documents therein has prevented the I st respondent from pursuing his legal rights and other daily activities. Taking into account, as considered above, that locking of the shop and sale of the items therein is in performance of the contractual terms by the applicant, and according to the decision in MREMA 9 case that is not good and sufficient reason for dispensing with notice. That is not an exceptional situation referred in Sarkar's The Law of Civil Procedure. I am therefore convinced that the ex parte temporary injunction order was issued contrary to rule 4 of order 37 of the C:PC. As to the effect of contravention to the mandatory provisions of rule 4, this court once held in TANZANIA HARBOURS AUTHORITY v. AFRICAN LINER AGENCIES CO. LTD [2004] TLR 127 at page 132: "Equally, the court acted illegally on issuing an ex parte interim injunction without giving notice to the opposite party ... " In the, final analysis, taking into account all what has been considered above, I hereby allow the application for revision with costs. Proceedings and the resulting ex parte orders are quashed for contravening the mandatory provisions of rule 4 of order 3 7 of the CPC on the require1nent of serving notice to the opposite party thereby denying the applicant its right to be heard. The trial court's records to be remitted for a fresh determination of the matter before a different magistrate. Z. G. MURUKE

JUDGE 30/03/2011 Ruling delivered in the absence of both parties duly notified. Z. G. MURUKE

JUDGE 30/03/2011 10