commercial bank of africa t ltd vs mic t ltd 2012 tzhccomd 19 15 may 2012

IN THE HIGH COURT OF TANZANIA COMMERCIAL DIVISION AT DAR ES SALAAM COMMERIAL CASE NO.72 OF 2009 COMMERCIAL BANK OF AFRICA (TANZANIA) LTD......... PLAINTIFF VERSUS MIC TANZANIA LIMITED............................................. DEFENDANT Date of hearing: 4th April 2011 and 27th February 2012 Date of last Order: 06/03/2012 Date of closing submissions: 15/03/2012 Date of Judgment: 15/05/2012 JUDGMENT MAKARAMBA, J.: The Plaintiff in this suit alleges that sometimes in November 2007, the Plaintiff entered into an agreement with the Defendant. The Plaintiff claims further that under that Agreement the Defendant undertook to forward to the Plaintiff's Bank monthly salaries of the employees of the Defendant who will be provided with personal loans by the Plaintiff's Bank. The Plaintiff alleges further that in consideration for the Plaintiff to grant the said facility to the Defendant's employees, the Defendant agreed and undertook to do the following acts through its authorized officer(s): (i) certify and forward each individual employee requesting a loan; (ii) issue a letter of undertaking to forward through the Plaintiff bank the monthly salaries to enable installments recovery; (iii) introduce and confirm status Page 1 of 27 of each individual employee; (iv) issue confirmation by email and telephone on each individual employee status; (v) forward to the bank monthly salaries of the individual employees after the Plaintiff personal grants the later financial facility by way of personal loan; and (vi) prior to the approval forward to the Plaintiff bank the first salary of each employee applying for the facility. The Plaintiff alleges further that in between June 2008 and September 2008, forty six (46) employees of the Defendant applied for the facility from the Plaintiff with the Defendant as per the Agreement. Basing on the defendant's undertaking in respect of each Applicant, and upon commitment for remittance of employee's salaries to the Plaintiff to effect monthly deductions for personal loans, the Plaintiff on various dates between June 2008 and September 2008 executed a credit facility with individual employees and provided them with personal loans. The plaintiff disbursed the funds in respective bank accounts of the Defendant's employees. Subsequently, the Defendant did comply with its obligation to forward salaries to the Plaintiff Bank in respect of all employees save for nine (9) individuals which conduct constituted breach of its obligation under the Agreement. The Plaintiff claims that failure of the Defendant to route the salaries of nine employees was communicated to the Defendant by the Plaintiff in various correspondences including but not limited to letters and meetings between them. The Defendant denied liability and alleged or otherwise denied their employment of the nine (9) employees whose salaries had not been routed to the Plaintiff and further denied executing or creating any obligation, under letters of undertaking or Page 2 of 27 otherwise in favour of the Plaintiff. As a result, the Defendant conduct constitute breach of obligation and/or misrepresentation the sum of TZS 130,467,434.00 together with interest and other charges remains due and owing to the Plaintiff as at 2nd June 2009. The Defendant vehemently disputes all of the Plaintiff's claims and avers that the Plaintiff is not entitled to a declaration that the Defendant breached any obligation or that the Defendant is liable for fraudulent conduct occasioning loss. Flowing from the above set of facts as alleged, the Plaintiff lodged this suit in this Court on the 27th day of August, 2009 claiming against the Defendant for the following:- (i) A declaration that the Defendant is in breach of its obligation under the agreement or in the alternative, the Defendant is liable for fraudulent conduct occasioning loss to the Plaintiff; (ii) Payment of Tshs 130,467, 434.00 being the amount due as at 2nd June 2009; (Hi) Interest at the commercial rate of 24°/o per annum on the sum in (i) above from 2?d June 2009 to the date of j'udgment; (iv) Interest at the Court's rate of 12% per annum on the decretal amount from the date ofjudgment till payment in full; (v) General damages; Page 3 of 27 (vi) Costs of the suit; (vii) Interest on costs at the Court's rate of 12°/o per annum; (viii) Any other orders or reiief(s) which this honourable Court deems fit andjust to grant. This suit revolves around the following issues, which were framed at the first day of hearing and were accordingly recorded by this Court, namely; 1. Whether there was an agreement between the parties in respect of granting personal loans to the Defendant's employees. 2. Whether the Defendant undertook to guarantee repayment of the loan in case of default on part of her employees. 3. What reliefs the parties are entitled to? The Plaintiff received the services of Mr. WALTER CHIPETA, learned Counsel. The Defendant sought the services of Mr. BEATUS MALIMA, learned Counsel. Both learned Counsel at the closing of the trial prayed to file their closing submissions, which prayer this Court dully granted. In making its case, the Plaintiff called two witnesses, M/s DOREEN ABISAI, PW1 and Mr. BENEDICT HAMIS, PW2. The Defendant called only one witness, TUMAINI SHIJA, DW1. Testifying as PW1, M/s DOREEN ABISAI, a banker employed with Barclays Bank Tanzania, who previously was working with the Commercial Bank of Africa, stated that she knew the Defendant in this case as among the customers of the Commercial Bank. PW1 testified further that the Page 4 of 27 Plaintiff had issued several facilities (personal loans) to some of the Defendant's employees. PW1 stated further that the Defendant identified his employees to the Plaintiff and issued a number of undertakings or some sort of guarantee against which the Plaintiff issued loans to the Defendant's employees with an agreement that their salaries will be channeled through the employees' personal accounts. PW1 testified further that about forty six (46) employees had been granted loans from the Plaintiff. PW1 tendered in this Court the personal loan application forms of Raymond Patrick Damas, Erasto Edward James, Noel Paul Nelson, Said Mussa Abdul, Joseph Dominick Japhet, Frank Mathias Joseph, Hamis Juma Omary, Godfrey Peter Mushi and Eliud Thomas Elias, all of which were admitted and marked as Exhibit Pl collectively. PW1 testified further that there are letters of undertaking issued by the Defendant for every person who applied for loan to the Plaintiff. PW1 tendered in this Court nineteen (19) letters of undertaking from MIC Tanzania Limited to Commercial Bank of Africa which were admitted and marked as Exhibit P2 collectively. PW1 stated further that, there are about ten (10) letters of undertaking issued by the Defendant that were sent to the Central Police Station and one original commitment letter which are still with the police station. PW1 tendered the letters from Commercial Bank, Zonal Crime Officer which were admitted as Exhibit P3A and other letters of undertaking which were admitted as Exhibit P3B collectively. PW1 stated further that, to release personal loan, the Plaintiff's Bank sometimes requires pay slips for the period of three months, bank statements for six months, original ID and/or certified copies. PW1 testified Page 5 of 27 further that the Plaintiff's Bank also requires letters of introduction and confirmation from the Defendant to confirm the employment of the applicants by the Defendant. PW1 stated further that the Defendant's employee were required to open an account with Commercial Bank of Africa, they were therefore required to present at the Bank three passport size photos, Identification Card, and they had to sign the specimen card and fill an application form. PW1 tendered in this Court ten (10) forms for request to open a personal account which were admitted as Exhibit P4 collectively. PW1 stated further that there are nine (9) general terms and conditions forms used to operate an account at Commercial Bank of Africa which PW1 tendered and were admitted as Exhibit P5 collectively. PW1 testified further that, there are seven (7) original specimen signature cards by the clients, which PW1 tendered and were admitted as Exhibit P6 collectively. PW1 testified further that there are nine (9) credit facility letters which relate to the Defendant's employees which PW1 tendered and were admitted as Exhibit P7 collectively. PW1 testified further that, there are certified staff identification cards for the Defendant's employees, which were presented to the Bank on request for the facilities and opening of account. PW1 tendered twenty seven (27) copies of MIC (T) Ltd identification cards as seen by the witness which were admitted as Exhibit P8 collectively. PW1 stated further that, there are nine (9) copies of contract of employment between MIC (T) Ltd and the individuals' names shown therein which PW1 tendered and were admitted as Exhibit P9 collectively. PW1 testified further that, there are introduction letters Page 6 of 27 confirming the employment of the employees of MIC (T) Ltd, which were issued by MIC Tanzania Ltd to the Commercial Bank of Africa. PW1 tendered three (3) letters of introduction from MIC (T) Ltd to Commercial Bank of Africa which were admitted as Exhibit PIO collectively. PW1 testified further that the Bank disbursed to the Defendant's employees more than TZS 800,000,000/=, but the salaries of nine employees were not channeled to the Bank, which is contrary to the Letters of Undertaking. PW1 stated further that the communication between the parties was made through e-mails, visits and phone calls. PW1 testified further that, some of the original pay slips of the Defendant's employees were brought to the Bank. PW1 tendered nine (9) pay slips which were admitted as Exhibit Pll collectively. PW1 told this Court further that, there are cash withdraw forms which were used by the Defendant's employees to draw money after they had been granted the loans. PW1 stated further that there are also statements of account showing the status of the account before and after withdraw of money by the Defendant's employee, which PW1 tendered and admitted as Exhibit P12 collectively. PW1 stated further that, there are loan statements of account showing the outstanding amount of every employee from the date of disbursement, including the loan statement of the following employees: Raymond Patrick Damas for the outstanding amount TZS 16,460,844.40, being the principal sum plus interest; Erasto James, a total of outstanding loan of TZS 17,019,570.46; Noel Paul Nelson for the amount of TZS 16,669,899.83; for Said Musa Abdul for the amount of TZS 16, 351,138.04; Page 7 of 27 for Joseph Japhet Dominic for the amount of TZS 17,088,143.44; for Godfrey Peter Mushi for the amount of TZS 16,928,408.93; for Frank Mathias Joseph for the amount of TZS 16,409,871.43; for Hamisi Juma Omari for the amount of TZS 16,185,172.51; and for Eliud Thomas Elias for the amount of TZS 17,112,309.93. PW1 tendered the nine (9) bank loan statements of account which were admitted as Exhibit P13 collectively. PW1 told this Court further that, some of the correspondences between the parties were made by way of e-mails. PW1 stated further that some confirmation was made through e-mails. PW1 tendered the email correspondences between parties of diverse dates which were admitted as Exhibit P14 collectively. PW1 stated further that, she was communicating with Evelyn Dillip, as the Personnel and Administrative Manager, and Rashidi Kakungu, who was the Treasury Manager, and Isack Mshunda, the Senior Payroll Account from MIC (T) Ltd. When cross-examined by Mr. Malima, learned Counsel for the Defendant, PW1 stated that, the facility taken by the Defendant's employees was unsecured. PW1 stated further under cross-examination that the Bank ensured the repayment of the loan through salaries of the employees which ought to have been channeled to the Bank for necessary deductions by the Defendant. PW1 stated further that the Defendant did not channel the employees' salaries to the Plaintiff's bank for deductions as agreed. PW1 stated further that, she was dealing with the Defendant's officials without knowing if they had been authorized by the Defendant's company or not. PW1 stated further that what she (PW1) knew was that, she was dealing with the signatories of the Defendant's company. Page 8 of 27 Testifying as PW2, Mr. BENEDICT EDMUND HAMISI, who told this Court that he works with Commercial Bank of Africa as Head of Credit Risk Management, and that he knows the Defendant's company by virtue of the credit facilities granted to the Defendant's employees by the Plaintiff, stated that the loan was issued to forty six (46) employees of the Defendant in 2006. PW2 stated further that out of the forty six (46) employees, nine (9) of them did not perform their duties as per the Agreement. PW2 stated further that the Plaintiff wrote a letter to MIC (T) Ltd to express its dissatisfaction for the nine (9) employees who defaulted to repay the loan. PW2 stated further that the Defendant's company had an obligation to channel its employee's salary to the Plaintiff's Bank so that at the end of every month the Bank could make deductions of whatever is due to the respective employees including the nine (9) employees. PW2 stated further that, there is a letter dated the 10th of December, 2008 from Commercial Bank of Africa to MIC (T) Ltd with regard to the non-remittance of the Defendant's employees' salaries to the Bank as per the Letters of Undertaking. PW2 tendered the letter dated 10th December, 2008 on non­ remittance of the Defendant's employees' salaries which was admitted as Exhibit P15. PW2 stated further that there is another letter issued by MIC (T) Ltd to Commercial Bank of Africa with regard to the consequence of non-adherence to the Letters of Undertaking. PW1 tendered a letter dated 11th February 2008 with regard to the undertaking to obtain bank loans from MIC (T) Ltd to Commercial Bank of Africa which was admitted as Exhibit P16. Page 9 of 27 PW2 told this Court further, there are other two letters from MIC (T) Ltd to Commercial Bank of Africa, the first one which is dated 24th day of July 2009, concerning Mr. Edward Nguya, where MIC (T) Ltd had informed the Bank that Mr. Edward Nguya has ceased to be an employee of MIC (T) Ltd with effect from 31st July 2009, and that his last salary was channeled to the bank's account from the 24th to the 28th of July 2009. The second letter is dated 4th August 2009 which was in regard to Mr. Eliud Kataraiya who was also an employee of MIC (T) Ltd, informing the Bank that this person will also cease to be an employee of MIC (T) Ltd with effect from the 4th of August 2009. PW1 tendered the two letters from MIC (T) Ltd to the Commercial Bank of Africa, dated 24th day of July 2009 and 4th day of August 2009 respectively, which were admitted as Exhibit P17 collectively. PW2 stated further that the Plaintiff's Bank made a resolution to proceed with legal action against MIC (T) Ltd. PW2 tendered a letter from Commercial Bank Board Resolution dated 18th April, 2009 which was admitted as Exhibit P18. PW2 stated further that, the Bank appointed C & M advocates to proceed with legal action. PW2 stated further that C & M issued a notice to MIC (T) Ltd dated the 2nd of June 2009 for MIC (T) Ltd to pay the Bank the amount due to the tune of TZS 130,467,434.40, together with interest at the rate of 20% within seven days from the date such notice. PW1 tendered the Demand Notice from C & M advocates dated the 2nd June, 2009 which was admitted as Exhibit P19. When cross examined by Mr. Malima, learned Counsel for the Defendant, PW2 stated that, before advancing loans to employees of any Page 10 of 27 company the bank has to confirm the stability of such company and how long the company has been performing in the market, and marketability and sustainability of its products. PW2 stated further that the Plaintiff is aware of the stability of the Defendant's Company being the first mobile operator in the country, and that it has been in the market for more than fifteen (15) years, and that it has been able to survive from competition by other companies in Tanzania. PW2 stated further that all the Defendant's employees who applied for loans at Commercial Bank of Africa were qualified for loan advancement since their salaries were above TZS 500,000/= PW2 stated further that each Applicant was also required to fill application form which gives details of a particular customer including salary, employment status and age. PW2 stated that the bank's customers are also required to present introduction letter from their employers, salary slips and bank statements. PW2 stated further that, the Defendant had undertaken to channel the employee's salaries to the Plaintiff for deductions, and also undertook to pay the bank any terminal benefits at the time when a person ceased to be an employee of the Defendant's company. PW2 stated further that, the Letters of Undertaking play the role of guarantee. Testifying as DW1, TUMAINI SHIJA who told this Court that he resides at Kijitonyama Bwawani Street and is employed by MIC (T) Ltd as Company Secretary and Legal Manager, stated that he joined MIC (T) Ltd on the 1st of January, 2011. DW1 stated further that, MIC (T) Ltd. had issued Letters of Undertaking committing itself to channel its staff salaries and terminal benefits to the Plaintiff's Bank. The said letters was signed by Page 11 of 27 Evelyn Dillip who is Personnel and Administration Manager and Rashid Kakungu as Treasury Manager. DW1 stated further that Evelyn Dillip and Rashid Kakungu had a dispute with the Defendant's company them to leave from the company. The Personnel and Administration Manager's duties was to administer staff records and day to day working environment in terms of stationary, cleanness and all other related things. On the other hand, the role of Treasury Manager basically was to manage the Company accounts with various banks looking at the levels of deposit and whether money has to be moved from one account or one bank to another. DW1 told this Court further that, the structure of MIC (T) Ltd starts from the Board of Directors under which there is a General Manager, Managers, Assistant Managers and general staff. DW1 testified further that the day to day activities of the company are always run by the General Manager and his team under the authority of the Board of Directors. DW1 told this Court further that the Board of Directors may authorize any transaction to be done either through specific resolution for specific purpose or by appointment. DW1 told this Court further that for any person from the Defendant's Company to make transaction with another entity there must be a resolution authorizing such person to perform such transaction on behalf of the Company. DW1 told this Court further that Evelyn Dillip and Rashid Kakungu did not have any mandate to sign the Letters of Undertaking on behalf of MIC (T) Ltd. DW1 told this Court further that the Letters of Undertaking should have been signed by the General Manager and the Company Secretary as the matter of process and procedure otherwise the letter is as good as nothing on the part of the Page 12 of 27 Company. DW1 testified further that, MIC (T) Ltd never entered into any agreement with Commercial Bank of Africa. DW1 testified further that the loans granted to the Defendant's employees were personal and do not involve the Defendant's Company in any way. DW1 told this Court further that the Defendant's company would have been involved only if the employees would have instructed the Company to channel their salaries to those respective bank accounts. When cross-examined by Mr. Chipeta, learned Counsel for the Plaintiff DW1 told this Court that, he joined MIC Tanzania Ltd on the 1st day of January 2011 after the transactions in dispute had already been done and after this case had been instituted in this Court. DW1 testified further under cross-examination that his testimony is based on information he obtained from the Company's records and from Elizabeth Amayo who was the then Human Resource Manager. DW1 denied ever meeting with either Evelyn Dillip or Rashid Kakungu. DW1 told this Court further that Evelyn Dillip has left MIC (T) Ltd due to complaint from the Plaintiff's bank. DW1 stated further that, there were some sorts of fraud committed by Evelyn Dillip and Rashid Kakungu while they were still in the Defendant's office. DW1 stated further that, he was informed by their Security Consultant, Fadhili Walele, that the issue of fraud committed by Evelyn Dillip had already been reported to the police and that the police are still going on with their investigation. DW1 admitted that MIC (T) Ltd had previously issued Letter of Undertaking to Commercial Bank of Africa and there is no any fault on the part of the Plaintiff. Page 13 of 27 Such as summarized above are the witness testimonies. Let me now proceed to determine the issues. I propose to determine the first and second issues jointly taking into consideration the evidence on record, the witness testimonies and the closing submissions by learned Counsel for the parties. In their closing submissions, learned Counsel for the parties put forward general legal principles, which I find useful as guiding principles for determining the issues in this suit. In closing submissions Mr. Malima submitted that as per JAMES FUNKE GWAGILO V. ATTORNEY GENERAL [2004] T.L.R 161, parties to a suit are bound by their pleadings. The Plaintiff has alleged in paragraph 4 of the Plaint that in November, 2007 the Plaintiff had entered into an agreement with the Defendant under which the Defendant undertook to forward to the Bank monthly salaries of its employees, facts which have not been proved by the Plaintiff during the trial, Mr. Malima submitted. The Plaintiff has never produced such agreement during the trial and therefore there is no such agreement at all, Mr. Malima concluded. While conceding that there is no "DEED" as in form of one single document in which all the parties place their hands and signature to validate the transactions, Mr. Chipeta argues that the "Letters of Undertaking", which have been admitted in this Court as Exhibit P2 and Exhibit P3 collectively, and the correspondences between the parties, laid the foundation of the contract between the Plaintiff and the Defendant. Mr. Chipeta refers to the decision of the Court of Appeal of Tanzania in the case of RAYMOND MARTIN V. CORAL COVE LIMITED, Civil Appeal No.54 of 2004 where it was held that: Page 14 of 27 "In Ahmed Said Omar v. Mazsons Hotel Limited, Civil Appeal No. 41 of1996 (unreported), in more or less similar circumstances the Court took the view that from the exchange of letters between the appellant and the respondent a contract of employment had entered. In that case there was no formal agreement had been entered..." Mr. Chipeta refers to the definition of the word "undertaking" in the Black's Law Dictionary 7th Edition (2002) West Publishing Co. at page 1528 and in R, Leslie & B.Sheila, Osborn's Concise Law Dictionary, 8th Edition, (1993), Sweet & Maxwell Limited, London, which means "a promise, a pledge or engagement." Mr. Chipeta submits further that a promise is not a binding contract unless it is supported by consideration and refers to Treitel in his book, The Law of Contract 11th Edition (2003) Sweet & Maxwell, London at page 67, where the learned author puts some legal limits on the enforcement of agreements thus: "...it is sufficient if there is either detriment to the promise even though the promisor does not benefit." Mr. Chipeta submits further that this is also in line with the provisions of section 2(1 )(d) of the Law of Contract Act, [Cap.345 R.E 2002] which provides as follows: Page 15 of 27 "When at the desire of a promisor, the promise or any other person, has done or abstained from doing, or does or abstains from doing or promises to do, or to abstain from doing, something such act or abstinence or promise is called consideration for the promise." Mr. Chipeta surmised that relying on the "Letters of Undertaking" Exhibit P2 and Exhibit P3 collectively, and the correspondences between the parties, the Plaintiff granted loans to the Defendant's employees. In contest, Mr. Malima submits that the "Letters of Undertaking" and other correspondences could only create a legal agreement binding on the Defendant only if Evelyn Dillip could have been acting under the instruction and authority of the Defendant's Company. This because DW1 never saw any Resolution by the Defendant Company authorizing Evelyn Dillip to engage into what she did, Mr. Malima pointed out. A company acts by way of resolutions or by acts of directors or anyone authorized by the directors of the company as it has been provided for under section 181 of the Companies Act, [Cap.212 R.E. 2002], Mr. Malima further submits. By virtue of the doctrine of agency, acts done by certain persons are rightly deemed acts of the company Mr. Malima further added. The company is the principal while its directors and those acting under instructions of the directors are its agents, Mr. Malima further submits. The directors have actual authority to bind the company, while those acting under instructions of the directors have implied authority to bind the company, Mr. Malima reiterated this legal position which is supported by statement of Diplock □ in FREEMAN & LOCKYER vs, BUCKHURST PARK PROPERTIES Page 16 of 27 (MANGAL) LTD (1964) 2 QB 480 at page 505, where His Lordship laid down the following test: "The...law...can be summarized by stating four conditions which must be fulfilled to entitle a contractor to enforce against a company a contract entered into on behalf of the company by an agent who had no actual authority to do so. It must be shown: (1) that a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the contractor; (2) that such representation was made by a person or persons who had actual authority to manage the business of the company either generally or in respect of those matters to which the contract relates. (3) that he (contractor) was induced by such representation to enter into the contract, that is, that he in fact relied upon it, and (4) that under its memorandum and articles of association the company was not deprived of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to enter onto a contract of that kind to the agent." The "Letters of Undertaking" was issued after the contract between the employee and the bank had already been concluded, and therefore an attempt to impose liability onto the Defendant is the grossest injustice, Mr. Malima further submits. It is a principle of law of contract that a guarantor of a loan cannot be bound without his consent, Mr. Malima pointed out Page 17 of 27 this legal position which has been well stated in TRIODOS BANK N.V V. DOBBS (2005) All E.R (D) 364 (2005) EWCA Civ. 630. Mr. Chipeta submits that the Plaintiff has dealt with the Defendant under assumption that if the Defendant's officers entered and or issued the "Letters of Undertaking" printed on the Defendant's letterheads, the said officials had requisite mandate. In support of his argument, Mr. Chipeta refers to the case of ROYAL BRITISH BANK V. TURGUAND [1856] 6 E & B 327. In that case, the directors of that company were authorized by the Articles of the Company to borrow on bonds such sums of money as should from time to time, by a resolution of the company in general meeting, be authorized to be borrowed. The directors gave a bond to T without the authority of such resolution. In that case it was held that: "The Company was liable on the bond as T was entitled to assume that the resolution of the company in general meeting had been issued." Mr. Chipeta also refers to the case of OFFICIAL LIQUIDATOR, MANASUBE & CO. (P) LTD V. COMMISSIONER OF POLICE (1968) 38 Comp. Cas. 884 where the Court observed as follows: "The lenders to a company should acquaint themselves with memorandum and articles, but they cannot be expected to embark upon an investigation as to legality, propriety and regularity of acts of directors or officers." Page 18 of 27 The "Letters of Undertaking" Exhibit P2 and Exhibit P3, were executed by the Defendant's company. They were dully signed by Evelyn Dillip, the Personnel and Administration Manager. They were co-signed by Rashid Kakungu, the Treasury Manager. Evelyn Dillip and Rashid Kakungu were the employees of the Defendant. The Defendant does not dispute this fact. The Defendant admits that the "Letters of Undertaking" originated from the Defendant's office. In his testimony, DW1 does not dispute the fact that all the nine (9) employees as complained of by the Plaintiff were dully granted loans by the Plaintiff's Bank. The only controversy by the Defendant is that such liabilities should not be imposed on the Defendant's company, but should be imposed directly on the employees since the loans the Defendant's employees took were of the kind that they are purely personal. In terms of the "Letters of Undertaking" it is stated therein very clearly that MIC (T) Ltd undertakes to do the following: 1) To channel salary for the aforementioned staff to his/her account maintained with the Commercial Bank of Africa limited once a confirmation of having approved the said loan is received by our office. 2) To channel the employee's final benefits in case of staff termination or resignation from the job for any reasons. 3) To inform you the new employer (if known) of the living employees who will still have un-deared loan balances. Page 19 of 27 In my considered view, under such "Letters of Undertaking" the Defendant's company committed and/or guaranteed itself to perform such obligations to the Plaintiff's Bank. The Defendant however, contends that Evelyn L. Dillip and Rashid Kakungu did not have authority to enter into any contract with the Plaintiff and that the Plaintiff's Bank negligently entered into contract with Evelyn Dillip and Rashid Kakungu without making inquiry to satisfy itself whether they can bind the Defendant's company. As rightly submitted by Mr. Chipeta, persons dealing with the company are presumed to have read the Memorandum and Articles of Association to satisfy themselves that the company has powers to enter into the proposed transactions. They are required to do no more. Outsiders are entitled to assume that as far as internal proceedings of the company are concerned, everything has been regularly done. Outsiders are presumed to know the Memorandum and Articles of Association of a company, but not what may or may not have taken place within the doors that are closed to them. I find the case of ROYAL BRITISH BANK V. TURGUAND [1856] 6 E & B 327 referred to by Mr. Chipeta in his closing submission to be quite relevant to the present case. I am at one with the submissions by Mr. Chipeta that the company performs it duties through the minds and acts of its officials. This principle has succinctly been restated by the Court of Appeal in TANGANYIKA LAND AGENCY AND OTHERS V. MANOHAR LAL AGGRAWAL, Court of Appeal, Civil Application No.26 of 2003 where at page 8 the Court quoting with approval the case of H.L BOLTON (ENGINEERING) CO. Page 20 of 27 LIMITED V. T.J. GRAHAM & SONS (1957) 1 QB at page 179 the holding of Lord Denning L.J that: "A company may in many ways be likened to a human body. It has a brain and nerve centre which controls what it does. It also has hands which are tools and act in accordance with directions from the centre. Some of the people in the company are nothing more than hands to do work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and will of the company and control what it does. The state of mind of these managers is the state of mind of the company and is treated by the law as such. Flowing from the foregoing principle, I can safely conclude that Evelyn Dillip, the Personnel and Administration Manager who co-signed the Letters of Undertaking, Exhibit P2 and Exhibit P3 with Rashid Kakungu, the Treasury Manager, both employees of the Defendant Company holding the position of managers represented the directing mind and will of the company and controlled what it does." DW1 however told this Court that there are some sorts of fraud which were committed by Evelyn Dillip and Rashid Kakungu, and that the Defendant's company had already reported the matter to the police, and therefore the Defendant's company is not bound by the fraudulent acts of Evelyn Dillip and Rashid Kakungu. This particular piece of testimony is not supported by any evidence on record for the Defendant to justify his allegations of fraud and the steps alleged Page 21 of 27 taken by the Defendant including reporting such incidence to the police and the police taking action. As rightly submitted by Mr. Chipeta, it is a settled law that, in the absence of proven allegation of fraud, duress, mistake and improper execution, a document speaks for itself, as it was held by the Court of Appeal of Tanzania in RAYMOND MARTIN V. CORAL COVE LIMITED, Civil Appeal No.54 of 2004 (supra) thus: "The law is settled that a document in the absence of proven allegation of fraud, duress, mistake and improper execution to mention a few exceptions, speaks for itself." There is no evidence on record on the steps alleged taken by the Defendant specifically concerning the allegations of fraud purportedly reported to the police. In my considered view, even if the Defendant could have successfully proved the fraud allegedly committed by the Defendant's employees in their capacity, the same could not exclude the Defendant from its obligation to channel to the Plaintiffs Bank the salaries of the nine (9) employees of the Defendant for deductions as agreed in the "Letters of Undertaking." Omission by the Defendant's Company to channel the salaries of its employees to the Plaintiff's Bank for deduction as agreed has therefore caused loss to the Plaintiff's Bank. Since, it is the Defendant who employed Evelyn Dillip and Rashid Kakungu to work for the Defendant Company, the Defendant Company had a duty to ensure that its officials are honest and faithful. In my considered view any misconduct on the part of the Defendant Company officials in performing their duties has nothing Page 22 of 27 to do with the Plaintiff's Bank. This legal position was observed in the case of Commercial Case No.6 of 2008 between USANGU LOGISTICS (T) LTD vs. SODETRA SPRL LIMITED & 2 OTHERS (unreported) at page 16, where it was held that: "I wish to point out here that much as the Plaintiff who had employed the 2nd Defendant had a duty to ensure that the 2nd Defendant is honest and faithful, any misconduct on the part of the 2nd Defendant in performing his duties has nothing to do with the 1st Defendant". In my considered view, it is not the duty of the outsiders to make inquiry on Defendant's officials as to whether they are honest or not. In his closing submissions, Mr. Chipeta raised another issue that the evidence of DW1 is irrelevant or of little value since it was based much on hearsay and therefore offends section 62 of the Tanzania Evidence Act, Cap.6 R.E,. 2002. According to Mr. Chipeta, hearsay evidence is not admissible in Court and relied on the case of TEPER vs R (1952) A.C. 480 at page 487 on the issue of inadmissibility of hearsay evidence where it was observed that: "Hearsay is not the best evidence and it is not delivered on oath. The truthfulness and accuracy of the person whose words are spoken to by another witness cannot be tested by cross-examination and the light which his demeanour would throw on his testimony is lost." Page 23 of 27 Mr. Chipeta also relied on the decision of the Privy Council in SUBRAMANIAM V. PUBLIC PROSECUTOR (1956) 1 W.L.R 965 at page 969 thus:- "Evidence of a statement made to a witness by a person who is not himself called as a witness may or may not be hearsay. It is hearsay and inadmissible when the object of the evidence is to establish the truth of what is contained in a statement.... " According to the testimony of DW1 on record, he told this Court that he joined MIC (T) Ltd. on the 1st day of January 2011 after the contract between the parties to the suit had been concluded and after the institution of this suit. When cross-examined by Mr. Chipeta, DW1 told this Court that, his testimony is based on information gathered from the records of the Company and other information obtained from Elizabeth Amayo. Thus, this part of the evidence of DW1 is plainly hearsay and therefore offends section 62(1) of the Evidence Act, Cap.6 R.E 2002. In the event and for the foregoing reasons, the first and second issues are to be answered in the affirmative. I turn to consider the issue of costs. In terms section 30 of the Civil Procedure Code, Cap.33 R.E. 2002, it is mandatory that costs of and incidental to a suit follow the event, unless the court determines otherwise depending on the circumstances of each case. In this suit, the plaintiff has also made a prayer for payment of general damages. It is a matter of general principle as per the decision of the Court Page 24 of 27 of Appeal of Tanzania in COOPER MOTOR CORPORATION LTD V. MOSHI/ARUSHA OCCUPATIONAL HEALTH SERVICES [1990] T.L.R 96 (CA), that general damages need not be specifically pleaded, and may be asked for by a mere statement or prayer of claim as the Plaintiff did in the present case. The Plaintiff however, has not told this Court the extent of loss in earnings the Plaintiff incurred as a result of the breach of the agreement by the Defendant, to enable this Court to assess the general damages to be awarded. Since as a matter of prayer, general damages, and which need not even to be specifically proved, in the absence of evidence of loss in earnings, however, it is difficult for this Court to assess the extent of general damages to be awarded and thus to exercise its discretion to award such damages as prayed. Doing so, this Court would be acting from vacuum. It is for this reason that I shall refrain from making an order for payment of general damages as prayed by the Plaintiff. In the whole and for the foregoing reasons the Plaintiff's suit succeeds. Judgment and Decree is hereby entered against the Defendant. The Plaintiff shall be entitled to the following reliefs: (i) It is hereby declared that the Defendant is in breach of its obligation under the agreement; (ii) The Defendant shall pay the Plaintiff TZS 130,467, 434.00 being the amount due as at 2nd June 2009; Page 25 of 27 (Hi) The Defendant shall pay interest at the commercial rate of 24% per annum on the sum in (i) above from 2nd June 2009 to the date ofjudgment; (iv) The Defendant shall pay interest at the Court's rate of 12°/o per annum on the decretal amount from the date of judgment till payment in full; and (v) The Defendant shall pay costs of this suit. Order accordingly. JUDGE 15/05/2012 Page 26 of 27 Judgment delivered this 15th day of May, 2012 in the presence of M/s Kirethi, Counsel for the Plaintiff and Mr. Ndanu, Counsel for the Defendant. JUDGE 15/05/2012 Word count: 6543 Page 27 of 27