COMM BANK OF AFRICA T LTD VS WHITE HAWK LOGISTIC LTD COMM CASE NO

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT DAR ES SALAAM COMMERCIAL CASE NO. 67 OF 2017 COMMERCIAL BANK OF AFRICA (TANZANIA) LIMITED ........ PLAINTIFF VERSUS WHITE HAWK LOGISTIC LIMITED ........ DEFENDANT SHAKEEL AHMED 2ndDEFENDANT JASPAL SINGH REHNCY 3rdDEFENDANT YASSIN MEMBAR 4thDEFENDANT JATINDER SINGH 5thDEFENDANT JASVINDER SINGH REHNCY .............. 6thDEFENDANT EX-PARTE JUDGMENT Date of the Last Order: 19/06/2018 Date of the Ex-Parte Judgment 30/07/2018 SEHEL, J. This judgment arose from the failure of the defendants to pay the plaintiff the outstanding amount in respect of credit and term A i loan facilities advanced to the 1st defendant and guaranteed by the 2nd, 3rd, 4th, 5th, and 6th defendants. It is alleged in the plaint that by credit facility letter dated 25th October, 2013 the plaintiff approved an overdraft facility in favour of the 1st defendant amounting to Tshs. 60,000,000/= and invoicing Discounting amount to Tshs. 40,000,000/= (hereinafter referred to as Facility No. 1 and 2 respectively). It is further alleged that by facility letter dated 6th April, 2016 the plaintiff approved term loan facility in favour of the 1st defendant of an amount of Tshs. 100,000,000/= for restricting the expired overdraft facility with an excess overdrawn amount and capitalization of excess amount into term loan facility for a period of 24 months. The facilities were secured by guarantees issued by the 2nd, 3rd, 4th, 5th, and 6th defendants in favour of the plaintiff and debenture instruments were issued in respect of eight tractors. It is alleged that the 1st defendant defaulted in servicing the loan and facilities as such default notices were issued to the defendants but still they failed to honour their obligations^ 2 The plaintiff has thus instituted the preset suit against the defendant jointly and severally claiming for: 1. A declaration that the 1st, 2nd, 3rd, 4th, 5th and 6th defendants are in breach of a term loan facility agreement and contracts of guarantee respectively by their failure to discharge their duties and obligations in accordance with the agreements; 2. The defendants jointly and severally be ordered to immediately pay to the plaintiff the outstanding amount which is Tshs. 134,086,307.38 being principal amount and interest on outstanding facility as at 10th April, 2017; 3. Payment of the default rate of interest (24% per month) charged from the date of filing the suit to the date of judgment; 4. Payment of interest (12% per annum) on the decretal amount from the date of judgment to the date of full payment; 3 5. Payment of general damages to cover the loss the plaintiff suffered for the defendant’s failure to discharge their obligations; 6. The defendants to pay the plaintiff costs of the suit; 7. Any other relief(s) that the Court may deem fit to grant. The 1st, 2nd, 3rd, 5th, and 6th defendants were dully served by way of substituted service through publication in two widely circulated newspapers in Mwananchi of 12th December, 2017 and Dailynews of 13th December, 2017 but defaulted to enter appearance and filed to file any defence. Therefore on 7th February, 2018 the plaintiff was allowed to proceed ex-parte against them. The 4th defendant after being served with summons and plaint, filed his written statement of defence. However, he never attended any court proceedings. On 2nd March, 2018 when the suit was coming for first pre-trial conference, the plaintiff was present through her counsel Maryam Semlangwa but the 4th defendant was absent as such the 4th defendant’s written statement of defence was strike out under Rule 4 28 (2) of the High Court (Commercial Division) Procedure Rules GN 250 of 2012 and the suit was ordered to proceed ex-parte against all the defendants. The plaintiff filed one witness statements of Hilorims Mayombo who appeared for cross examination and re-examination on 28th May, 2018 and his witness statement was received to form part of PW1 ’s testimony in chief and part of proceedings of this case. It was the testimony of PW1 that he is the remedial officer of the plaintiff since October, 2015 thus he is conversant with the facts of the case. He said amongst his duties are to undertake recovery process, including debt repayment arrangement negotiations or the use of alternative recovery techniques such as legal demand letters, filing cases in the court of law, receiverships, repossession and sale of borrower’s properties, sale of properties via public auction and application for civil imprisonment of defaulting customers; management of delinquent/non -performing portfolio in the bank's 5 lending book, comprising of personal loans and insurance premiums financing, vehicle loans and any other SMEs or corporate loans. PW1 testified that through a facility letter dated 25th October, 2013 with reference number CBA/CAU/WHITEHAWK/10/13 the plaintiff offered and approved in favour of the 1st defendant an overdraft facility amounting to Tanzania Shillings Sixty Million only (Tshs. 60,000,000/=) for meeting capital requirement and an Invoicing Discounting amounting to Tanzania Shillings Forty Million (Tshs. 40,000,000/=) for discount invoices to London Distillers. The Credit Facility Letter and Discounting was tendered and admitted as Exhibit P2. It was further the testimony of PW1 that through a facility letter dated 6th April, 2016 with reference number CORP/93554/66/2016/ek the plaintiff offered and approved in favour of the 1st defendant a Term Loan Facility amounting to One Hundred Million for restructuring the expired Overdraft facility with an excess overdrawn amount and capitalization of excess amount into a Term Loan. The Credit Facility 6 Letter in respect of the Loan was tendered and admitted as Exhibit Pl. PW1 said the said facilities were secured by: first ranking specific debenture charge in favour of the Bank; personal guarantees issued in favour of the bank; and debenture on company’s debtors to cover the facility at a minimum of 125% exposure. The securities were tendered and admitted collectively as Exhibit P3. PW1 further testified that the plaintiff disbursed the money to the 1st defendant. He said the 1st defendant accepted the money and utilised it but failed to repay the loan. He said since the 2nd, 3rd, 4th, 5th, and 6th defendants guaranteed the loan and interest in case the 1st defendant is in breach then the plaintiff called upon the 2nd 3rd, 4th, 5th, and 6th defendants to repay the outstanding amount of loan and interest but they failed and/or neglected to discharge their obligations under the guarantees agreements. He said despite several demands the defendants failed to honour their obligations as such the plaintiff suffered numerous losses and considerable 7 damage in her business on account of decreasing its capital for running the business and as at 10th April, 2017 the outstanding amount on the current account and loan balance stood at Tanzanian Shillings Eight Million Eight Hundred Forty Nine Thousand Two Hundred Fifty Four and Sixty Nine Cents (Tshs. 8,849,254.69) and Tanzania Shillings One Hundred Twenty Five Million Two Hundred Thirty Seven Thousand Fifty Two and Sixty Nine Cents (Tshs. 125,237,052.69) which brings a total of Tanzania Shillings One Thirty Four Million Eighty Six Thousand Three Hundred Seven and Thirty Eight Cents (Tshs. 134,086,307.38). The two bank statements of the 1st defendant bank accounts were tendered and admitted collectively as Exhibit P4. From the evidence tendered before the Court, it is established on the preponderance of probability that the 1st defendant took the loan facilities and failed to comply with the terms and conditions of the said loan facilities. The terms and conditions of the term loan facility as they appear in exhibit Pl are such that the 1st defendan^ 8 shall repay the loan within a period of twenty four (24) months with interest in equal consecutive monthly instalments from the date of drawdown. Exhibit P4 shows that the 1st defendant made a drawdown on 28th April, 2016 but there had been no single repayment made. I therefore find that the 1st defendant defaulted the terms and conditions of the term loan agreement. Sections 78, 79 and 80 of the Law of Contract Ordinance, Cap. 433 provide as follows - "78. A ‘contract of guarantee’ is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the ‘surety’; the person in respect of whose default the guarantee is given is called the ‘principal debtor, ’ and the person to whom the guarantee is given is called the ‘creditor’. A guarantee may either be oral or written^, 9 79. Anything done, or any promise made, for the benefit of the principal debtor may be a sufficient consideration to the surety for giving the guarantee. 80, The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract. Under Section 78 above, a party who promises to discharge the liability of a third party in case of his default and gives guarantee is called the ‘surely’ and a party in respect of whose default the guarantee is given is called the ‘principal debtor’. In the matter at hand the 1st defendant is the principal debtor whom I have found that it has defaulted repayment. The question then ensues is whether there existed any guarantee in respect of the 1st defendant’s default? It is tendered before this Court various personal guarantees of the 2nd, 3rd, 4th, 5th, and 6th defendants as Exhibit P3. Each of these defendants signed the individual personal guarantees committing themselves to 10 irrevocably and unconditionally discharge the debtor’s obligation to the bank on demand in writing by the bank to the guarantor without deduction, set-off, or counterclaim, together with interest thereon from the date of such demand and the said guarantee were limited to the sum of Tshs. 125,000,000/=. On my reading and careful consideration of the Exhibit P3,1 am satisfied and hold that Exhibit P3 are guarantees entered into and given by the 2nd, 3rd, 4th, 5th, and 6th defendants to the plaintiff in consideration of the plaintiff accepting to grant credit and term loan facilities and that each of the 2nd, 3rd, 4th, 5th, and 6th defendants limited their exposure of up to the maximum of Tshs. 125million. Therefore, the 2nd, 3rd, 4th, 5th, and 6th defendants are liable to the plaintiff to the extent of their guarantee as their liability is co­ extensive with that of the principal debtor. (See the case of Grayson & Company Ltd Vs A.H Wardle (Uganda) Ltd and Others [1963] E.A 582) li In the end judgment is hereby entered against the defendants jointly and severally in favour of the plaintiff and it is hereby decreed that:- 1. The defendants breached the terms and conditions of the term loan facility agreement and contracts of guarantees by their failure to repay the outstanding loan; 2. The defendants shall jointly and severally pay the Plaintiff Tshs. 134, 086, 307.38 (Tanzanian Shillings One Hundred Thirty Four Million Eighty Six Thousand Three Hundred Seven and Thirty Eight Centsjonly being the outstanding loan plus interest as at 10th April, 2017; 3. The defendants shall jointly and severally pay the plaintiff contractual interest rate of 24% per month on Tshs. 134,086,307.38 to be charged from 10th April, 2017 to the date of judgment; 4. The defendants shall jointly and severally pay the plaintiff interest rate of 7% per annum on the decretal amount from the date of judgment to the date of full payment; and 12 5. The defendants shall jointly and severally pay the plaintiff costs of the suit which shall be taxed. For avoidance of doubt the prayer for general damages is declined since interest awarded suffice to cover the loss suffered by the plaintiff. It is so ordered. Dated at Dar es Salaam this 30th day of July, 2018. 30th day of July, 2018. 13