charles cornel tarimo vs bestways capital management ltd bcm 2023 tzhccomd 177 21 june 2023

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION)

AT ARUSHA MISCELLANEOUS COMMERCIAL APPLICATION NO. 61 OF 2023

BETWEEN CHARLES CORNEL TARIMO............................................ APPLICANT Versus

BESTWAYS CAPITAL MANAGEMENT LIMITED (BCM)........................................................... RESPONDENT Date of last order: 21st June, 2023 Date of Ruling: 21st June, 2023

RULING MKEHA, J In this application, the applicant/decree holder is moving the court for an order having effect of lifting veil of incorporation so that the respondent's Directors can be arrested and detained as civil prisoners for failure of the respondent to satisfy the decree in Commercial Case No. 17 of 2022. The application is made under Order XXI Rules 9 and 35 of the Civil Procedure Code. The chamber summons is supported with an affidavit sworn by Mr. Page 1 of 7 Charles Cornel Tarimo, the applicant and the decree holder. On the other hand, the application is contested through a counter affidavit affirmed by Mr. Ahmed Mkwavya, Principal Officer of the respondent. Whereas Mr. Clavery Mlowe learned advocate represented the applicant, Mr. Temistocles Rwegasira learned advocate represented the respondent. The reasons in support of the application are contained in the affidavit accompanying the Chamber Summons. Of relevance, is paragraph 13 of the said affidavit which is to the following effect: That, after institution of Miscellaneous Commercial Application No. 215 of 2022 for execution of the decree, the parties agreed to settle and a deed of compromise was executed between the parties. In the said deed of compromise, the respondent committed herself to satisfy the decree in three instalments commencing from the 3rd day of April, 2023. In terms of the said deed of

compromise which is annexed to the application as Annexure CT-10 collectively, the respondent undertook to pay USD 17,787.96 on 3rd April 2023, USD 17,787. 96 on 3rd July 2023 and USD 17,787.96 on 3rd October 2023. Page 2 of 7 Through the said deed of compromise, the parties had also agreed that, upon failure to meet any of the instalments the applicant/decree holder would have her natural right to proceed with the execution process. Up to the date of institution of the present application, the respondent had dishonoured her undertaking as contained in clauses 1.2 and 2.2 of the deed of compromise executed by the parties on 10th day of February 2023. Mr. Mlowe learned advocate for the applicant asked for lifting of the veil of incorporation so that the Directors of the Judgement Debtor could be sent to prison as civil prisoners. Mr. Rwegasira learned advocate for the respondent commenced his submissions by reminding the court that, in law, the Directors of a company are distinct from the company itself. The famous case of SOLOMON VS SOLOMON (1897) AC 22 was cited. He then adopted contents of Mr. Mkwawa's counter affidavit to form part of his submissions. The learned advocate went on to submit that, the Directors sought to be detained had not committed any fraudulent act or crime. The learned advocate insisted that, the respondent was still committed and intending to settle the

decree. The learned Advocate submitted that the respondent was not guilty of concealment or transfer of properties to evade the execution process. Page 3 of 7 The decision in YUSUFU MANJI VS EDWARD MASANJA AND ANOTHER (2006) TLR 127 was cited. According to the learned advocate, failure of the respondent to satisfy the decree was a result of unfortunate situation caused by COVID 19 and the Ukraine War and not neglect of the respondent/ judgement debtor to pay while having means of doing so. The only issue for determination is whether the applicant has satisfied the legal conditions for lifting of veil of incorporation. In terms of the decision in YUSUFU MANJI Vs EDWARD MASANJA & ANOTHER (supra), before the decree holder succeeds in having the veil of incorporation lifted for purposes of execution of a decree, he has to prove that, according to the circumstances prevailing at the time of making an application for execution of his decree, there is no real separation between the company and its owners. The decree holder has also to prove the company's actions which are wrong and fraudulent, say, concealing assets of the company or doing other acts calculated to obstruct execution of the decree against it and that, unless the veil of incorporation is lifted, the decree holder stands to suffer for not enjoying what the court decreed in his favour. As correctly submitted by Mr.

Rwegasira learned advocate, the applicant's affidavit has nothing suggesting that the respondent is concealing or Page 4 of 7 transferring her assets to obstruct the execution process. However, concealment or transfer of properties is not the only allegation that can lead into arrest and detention of the Judgement debtor as a civil prisoner. Proof of any allegation by the decree holder touching any of the matters listed under sub rule 2 (a) to (e) of Rule 39 of Order XXI of the Civil Procedure Code can also lead to arrest and detention of the judgement debtor. Sub -rule (2) (d) of Rule 39 Order XXI of the Civil Procedure Code is to the effect that, refusal or neglect on the part of the judgement debtor to pay the amount of the decree or some part thereof when he has, or since the date of the decree has had the means of paying it is one of the circumstances which may lead to arrest and detention of the judgement debtor. The burden to show that the judgement debtor was possessed of adequate means to pay but refused or neglected doing so rests upon the decree holder. However, the burden is not the one of the nature to prove the facts in issue or relevant facts in the suit. It is sufficient if the decree holder indicates the means possessed by the judgement including the judgement debtor's own commitment and promises to pay. In the present application, the applicant relied on the

judgement debtor's own commitment to sign the deed of compromise. (Annexture- CT10 to the affidavit in support of the application). Page 5 of 7 Through the said deed of compromise, the judgement debtor declared having means to satisfy the decree in three equal instalments commencing on 3rd April 2023. The judgement debtor undertook to face consequences of the execution process in the event of default in paying any of the instalments. The judgement debtor dishonoured her own promise which resulted from own declaration that she had means of satisfying the decree in instalments. I therefore hold that, the applicant has discharged her burden of proof and the judgement debtor has defaulted paying while having means of doing so. The judgement debtor's commitment was done through her Directors. It is therefore proper that the veil of incorporation be lifted to hold the Directors responsible. The veil of incorporation is hereby lifted. I proceed to order arrest and detention of Messrs Steven Cyliacus Ndaula, Ahmed Adam Mkwawa and Sylvanus Clemence Ndaula as civil prisoners unless they pay the decretal sum on or before the 21st day of September, 2023. Commitment of the three Directors to prison shall be preceded by payment of subsistence allowance of the three persons to relevant authorities which is determined at TZS 300,000/= per person per month times six months the Page 6 of 7 period for which the three persons are ordered to be detained as civil prisoners. It is so held. Dated at DAR ES SALAAM this 21st day of JUNE 2023. Court: Ruling is delivered in the presence of Mr. Mlowe learned advocate for the applicant and Mr. Rwegasira learned advocate for the respondent.

JUDGE 21/06/2023 Page 7 of 7