BARRY DISMAS CHALE VS KCB BANK TANZANIA LIMITED

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (DAR ES SALAAM SUB-REGISTRY) AT DAR ES SALAAM CIVIL CASE NO. 165 OF 2023 BARRY DISMAS CHALE ……………...................................PLAINTIFF VERSUS KCB BANK TANZANIA LIMITED................................................DEFENDANT (MAIN SUIT) KCB BANK TANZANIA LIMITED...............................................PLAINTIFF BARRY DISMAS CHALE ……………...................................... DEFENDANT (COUNTERCLAIM) JUDGMENT Date of last order: 08/11/2024 Date of Judgment: 15/11/2024 A.A. MBAGWA, J. The dispute in this suit hinges on credit facility agreements entered into between the parties. The plaintiff, Barry Dismas Chale is a former employee of the defendant. He was employed as Director of Corporate Banking. During his employment term, the plaintiff enjoyed various credit facilities from the employer (the defendant) which he was servicing 1 accordingly. However, on the 1st day of April 2022, the plaintiff was terminated from employment on grounds of poor performance. Following his termination, the plaintiff encountered challenges in servicing the facilities as his main source of income was employment. As such, in a bid to mitigate the burden, the plaintiff wrote to the defendant through a letter dated 22nd April 2022 (exhibit P5) requesting for restructuring of the payment terms. The defendant welcomed the plaintiff’s request via a letter dated 28th April 2022. Consequently, both parties signed the first addendum dated 28th April 2022 (P4) to relax the repayment mode. It is undisputed that on the 28th day of April 2022, the plaintiff had an outstanding loan amount from the four facilities of TZS 300,302,669.00. According to the evidence, the plaintiff was given a moratorium of twelve (12) months to stay the repayment. It was further stated that upon restructuring, the facilities were automatically converted to commercial rates. As per the evidence of both the plaintiff and defendant, the moratorium was expiring on 27th April 2023. It was contended by the defendant that, upon the expiry of the moratorium, the plaintiff, Barry Dismas Chale failed to resume the 2 repayment of the outstanding debt. Consequently, on 16th August 2023, the defendant issued the plaintiff with a demand notice (exhibit P3) claiming a sum of TZS 372, 762,648.48. The plaintiff did not agree at all with the defendant’s claim of TZS 372, 762,648.48. He thus resolved to file the present suit praying to the Court for judgment and decree against the defendant in the following reliefs; (i) A declaration that the interests chargeable by the defendant after the termination of the employment which was the sole source of the repayment of the loan is illegal and unjustifiable. (ii) A declaration that the outstanding loan facility payable to the defendant by the plaintiff after the termination of the sole source of repayment of the loans is TZS 300,302,669.00. (iii) An order for payment of the outstanding loan facility amounting to TZS 300,302,669.00 within the period of twelve (12) months from the date of judgment. (iv) Payment of the hereinabove claimed general damages as may be assessed by the Honourable Court. (v) Costs pertaining to litigation hereof 3 (vi) Any other relief(s) that the court may deem just to grant. Upon service, the defendant, KCB Bank Tanzania Limited filed a written statement of defence disputing the plaintiff’s claims. Besides, the defendant filed a counterclaim against Barry Dismas Chale seeking the following reliefs; (i) A declaration that the Defendant in the counterclaim is in breach of the loan agreement between them. (ii) An order for payment of TZS 372,762,648.24, being the outstanding loan and accrued interest and failure of which an order for attachment and sale of the pledged securities to recover the outstanding loan amount. (iii) Commercial interest of 23% per annum on the outstanding amount from the date of default to the date of judgment; (iv) Interest on the decretal amount at the Court's rate of 12% per annum from the date of judgment to the date of full and final satisfaction; (v) Payment of general and punitive damages to be assessed by the Court; 4 (vi) Costs of this suit; and (vii) Any relief that this court shall deem just to grant. Upon conclusion of the pleadings and attendant preliminaries, this Court, with the involvement of both parties, framed and recorded the following issues: (a) Whether the plaintiff, Barry Dismas Chale is liable to repay the loan according to the loan agreements. (b) Whether the defendant, KCB Bank is entitled to charge the accrued interest and penalties after the termination of the plaintiff’s employment. (c) To what reliefs are parties entitled? During the hearing of the case, the plaintiff was represented by Messrs Emmanuel Kessy and Abdul Azizi Baisi, learned advocates whilst the defendant, KCB Bank Tanzania Limited had the services of Mr. Robert Mossi, learned advocate also. In an effort to make his case, the plaintiff in the main suit stood as a sole witness and tendered six (6) documentary exhibits namely, a bank facility 5 dated 26/08/2016 (exhibit P1), two documents namely, judgment between the plaintiff and the defendant in respect of the termination of employment dated 22/05/2024 and decree dated 06/06/2024 (exhibit P2 collectively), a demand notice from KCB Bank dated 10/08/2023 (exhibit P3), first addendum letter dated 28/04/2022 exhibit P4, a letter titled ‘ my outstanding loan with KCB Bank Tanzania’ dated 22/04/2022 exhibit P5, and a Credit Info Report dated 07/03/2024 (exhibit P6). It was the plaintiff’s evidence that the defendant was not entitled to charge interest after the termination of his employment. As such, the plaintiff contends that he is only indebted to the defendant to the tune of TZS 300,302,669.00. In rebuttal, the defendant disputed the plaintiff’s claims. She paraded one witness namely, Damas Gabriel Mwagange (DW1) whose witness statement was adopted to form part of his testimony. In addition, the defendant produced several documents which were admitted as follows; Seven (7) offer letters dated 06/04/2016, 28/12/2018, 20/08/2020, 23/12/2020, 29/12/2020, 04/01/2021 and 28/04/2022 (exhibit D1 collectively), legal mortgage dated 08/01/2019 (exhibit D2), chattel 6 mortgage dated 11/02/2020 (exhibit D3), consent to issue treasury bond as lien along with offer letter of 15/08/2019 and lien creation form dated 13/09/2019 (exhibit D4 collectively), four (4) loan account statements namely, No. AA20234K2KBS, 3301129692, AA210072GJZL, and AA20234K2KBS (exhibit D5 collectively), and staff loan policy dated 31/07/2021 (exhibit D6). It was the defendant’s account that the plaintiff was indebted to the defendant for TZS 372, 762,648.48 as of the 11th day of August 2023. DW1 stated that upon restructuring on 28th April 2022, the commercial interest rate commenced to apply against the plaintiff whereas the plaintiff vehemently contended that charging interest after his termination was illegal and unjustified. At the close of the hearing, both parties filed their respective submissions. I am exceedingly grateful for their informative arguments. However, I will not reproduce them verbatim. Suffice it to say that I have thoroughly read and considered them in my deliberations. Having gone through the evidence of each party and scanned the rival submissions it is now opportune to determine the issues framed. To begin with the 1st issue on whether the plaintiff, Barry Dismas Chale is 7 liable to repay the loan according to the loan agreements. There is no dispute that at the time of the plaintiff’s termination of his employment, he had four outstanding facilities with a total value of TZS 300,302,669.00. The evidence tells it all that following the plaintiff’s dismissal from employment, he requested the defendant to restructure the loan agreements in particular to get a moratorium. In the last two paragraphs of the plaintiff’s letter to the defendant dated 22nd April 2022 (exhibit P5), the plaintiff had this to say; ‘With this letter, I would like to inform you that I am yet to secure a job or establish an alternative source of income for both family subsistence and servicing of my outstanding loans. Therefore, it is unfortunate that, at this stage, I am not in position to provide the loan repayment/take-over proposal. Given the situation as outlined above, I would like to request for a 12 months loan repayment moratorium of both principal and interest. I will be in a position to share the required proposal when I establish a reliable and stable source of income.’ 8 The defendant accepted the plaintiff’s proposal and hence the two signed a restructuring agreement namely, a first addendum letter dated 28th April 2023 (exhibit P4) which was also tendered by the defendant as exhibit D1. On page 1 of the restructuring agreement, it contains the following conditions; 1. The 12 months moratorium period on both principal and interest is subject to the borrower’s undertaking to proactively update the Bank within 6 months from present time and that the Bank reserves the right to revise the moratorium to align repayment once fresh income details are availed/determined. 2. The moratorium will not be extended beyond 12 months. 3. Upon expiry of the approved moratorium facilities will automatically be converted to commercial rate in line with the KCB Bank Tanzania Limited exist staff guidelines. 4. NA 5. NA 6. NA 7. Repayment to resume upon expiry of the moratorium. 9 Further, on page 3 of the restructuring agreement, the plaintiff committed himself as follows; ‘I, refer to your Letter dated 28th April, 2022 (of which the above is a copy) in which you offered to restructure my Credit Facilities in aggregate sum of TZS 300,302,669.00 (Tanzanian Shillings Three Hundred Million Three Hundred Two Thousand Six Hundred Sixty- Nine Only) by allowing a 12 months moratorium period on both Principal and Interest repayments on the terms and conditions contained therein and I am pleased to accept such offer on such terms and conditions.’ From the above, it is common cause that through the restructuring agreement (exhibit P4 and D1), the plaintiff agreed to service the outstanding loans according to the conditions agreed upon. The said conditions include a moratorium of twenty (12) months and conversion of the facilities to commercial rates. In view of the foregoing, it is my considered findings that the plaintiff is bound to repay the outstanding loans according to the loan agreements 10 as amended by the restructuring agreement ‘ first addendum letter’ (exhibit P4). Thus, the 1st issue is answered in the affirmative. The 2nd issue is whether the defendant, KCB Bank is entitled to charge the accrued interest and penalties after the termination of the plaintiff’s employment. As hinted above, the restructuring agreement (exhibit P4) which was signed after the plaintiff’s termination of his employment did not waive the interest rather it converted the loan interest to commercial rates. Condition No. 3 provides: ‘Upon expiry of the approved moratorium facilities will automatically be converted to commercial rate in line with the KCB Bank Tanzania Limited exist staff guidelines.’ DW1 was very clear in his evidence that the moratorium did not aim to waive the interest but rather to give the plaintiff a holiday to regain the financial capacity to service the loan. It is a trite law that parties are bound by the agreement terms that they freely entered no matter how stringent they might be. See the cases of Miriam E.Maro vs Bank of Tanzania, Civil Appeal No. 22of 2017, CAT at Dar es Salaam, Unilever Tanzania Ltd vs. Benedict Mkasa t/a BEMA Enterprises, Civil Appeal No. 41 of 11 2009, CAT at Dar es Salaam, Philipo Joseph Lukonde vs Faraji Ally Saidi, Civil Appeal No. 74 of 2019, CAT at Dodoma, Simon KicheleChacha vs Aveline M. Kilawe, Civil Appeal No. 160 of 2018, CAT at Mwanza, and Kilanya General Supplies Ltd. and Another vs CRDB Bank Limited and Two others, Civil Appeal No. 1 of 2018, CAT at Dar es Salaam. Looking at the facility agreements and the restructuring agreement (exhibit D1 collectively), nowhere the plaintiff is exonerated from the payment of interest nor did the plaintiff, in his letter to the defendant dated 22nd April 2022 (exhibit P5) request to waive or stop interest. He only requested for moratorium. In that regard, I am at one with the defendant that she is entitled to charge the accrued interests and penalties. If the plaintiff found the agreement terms onerous after termination of employment, it was upon him to sit with the lender and request to further relax the contractual terms. I therefore answer the 2nd issue affirmatively. As to what reliefs are parties entitled to, it is evident from the deliberations above that the plaintiff in the main suit failed to repay the loan amount to wit, principal, and interest as such, he breached the agreement. It is the 12 law that a party who breaches the contract terms should remedy the other party. See Section 73(1) of the Law of Contract Act and the case of Amandus Ziky Masinde vs Nyamsera Marumba, Civil Appeal No. 88 of 2016, HC, Commercial Division. The plaintiff, in the counterclaim, has prayed for several reliefs as indicated hereinabove. However, after dispassionately considering the obtaining circumstances including the defendant’s termination of his employment I do not deem it fit to grant orders for commercial interest of 23% per annum on the outstanding amount from the date of default to the date of judgment and payment of general and punitive damages. It is a settled position that general damages as well as the interests for the period from the time of instituting the suit up to the delivery of the judgment are awarded at the discretion of the court. See the case of Ashraf Akber Khan vs Ravji Govind Varsan, Civil Appeal No. 5 of 2017, CAT at Arusha. For that reason, I exercise this discretion and decline to grant the prayers such as commercial interest of 23% per annum on the outstanding amount from the date of default to the date of judgment and payment of general and punitive damages. 13 All the above considered, I dismiss the plaintiff’s claims in the main suit, on the one hand, whilst, on the other hand, I enter judgment and decree in the counterclaim against the defendant with the following consequential orders: (i) It is hereby declared that the defendant in the counterclaim, Barry Dismas Chale is in breach of the loan agreement between them. (ii) The defendant in the counterclaim, Barry Dismas Chale is hereby ordered to pay the plaintiff, KCB Bank Tanzania Limited TZS 372,762,648.24, being the outstanding loan and accrued interest. (iii) Interest on the decretal amount under (ii) above at the Court's rate of 7% per annum from the date of judgment to the date of full and final satisfaction; (iv) Each party should bear its costs. It is so ordered. 14 The right of appeal is fully explained. A.A. Mbagwa JUDGE 15/11/2024 Court: This judgment has been delivered in the presence of Mr. Atley Thawe, learned advocate holding briefs of both Mr. Abdul Azizi Baisi, learned advocate for the plaintiff, and Mr. Denis Machui, learned advocate for the defendant. A.A. Mbagwa JUDGE 15/11/2024 15