20031009 TZCA Dar es Salaam1

IN THE COURT OF APPEAL OF TANZANIA

AT DAR ES SALAAM (CORAM: MROSO, J.A., MUNUO, J.A., And NSEKELA, J.A.) CIVIL APPEAL NO. 12 OF 1999

BETWEEN

CONSOLIDATED HOLDING CORPORATION (As successor to National Bank of Commerce) ........ APPELLANT AND ANCHE MWEDU LIMITED ...................................... RESPONDENT (Appeal from the Ruling of the High Court of Tanzania at Dar es Salaam) (Mapigano, J.) dated the 5 th day of September, 1997 in Civil Case No. 197 of 1993

JUDGMENT MUNUO, J.A.: i . In Civil Case No. 197 of 1993 in the High Court of Tanzania, Mapigano, J. as he then was, overruled preliminary objections raised by the present appellant, the 4th defendant at the trial, against the respondent. The High Court having dismissed the preliminary objections, the appellant preferred the present appeal to challenge the same. Mr. Rutabingwa, learned advocate represented the appellant. At the commencement of the hearing, he orally ·applied to ,: '--··- -·- .. ·-- .... ... ....,· 2 amend the name of the appellant by substituting the current name, th?t is, Consolidated Holding Corporation. The respondent had no · objection to the said oral application which we granted. Mr. Lameck Mfalila and Mr. Colman Ngalo, learned advocates, represented the respondent company, ANCHE MWEDU Ltd. The preliminary objections raised in the Amended Written Statement of Defence and Counter-Claim of the 4th Defendant are stated at paragraphs 2 (a) and (b) as follows: 2 (a) that the suit against the fourth defendant is time barred; and (b) that the Amended Plaint discloses no cause of action against the fourth defendant (now the appellant). Mr. Rutabingwa filed three grounds of appeal, which are>_ 1. The· learned trial Judge erred in law by holding that the plaint filed did disclose a •------ ,, / 3 cause of action against the appellant then · [the] fourth defendant on the ground that .the - Letter of Guarantee under which payment was made was void and thus v_iolating the written laws of Tanzania without ascertaining the validity of the said Letter of Guarantee issued at the request of the respondent and the fact that the issue if material was never raised at the time of Registration.

2. The learned trial Judge erred in law by holding that the suit by the respondent against the appellant was partly founded on the alleged fraud and that the respondent became aware of the fraud after the award without properly ascertaining the fraud complained of or whether it was really after the award when the· respondent became aware of the said alleged fraud whereas in fact the appellant - became aware of the alleged fraud when it took possession of the goods in 1987 and not at the time of the award and the appellant was never a party to it if any. i '·· 4 3. The learned trial Judge erred in law and on evidence by holding that the suit by the respondent against the appellant was not time barred as the six years limitation was to be reckoned from the day payment was made by the appellant to the then fifth defendant J.G. Vacuum Flasks Limited after the delivery of the interlocutory ruling on 11/2/1994 whereas in fact the suit was flied in 1993 and could not have been influenced by the non-existent payment at the time and such payment was made after the appellant was allowed to do so by the Court . . l On ground one of the appeal, Mr. Rutabingwa faulted the learned trial Judge for holding that the Amended Plaint disclosed a cause of action because the appellant did not comply with Foreign - Exchange Regulations before paying the money to the supplier, a foreign company. He

maintained that the Bank of Tanzania authorized the appellant to pay the debt so the details of whether the •· . I' Bank of Tanzania Official who consented to the payment had mandate from the Governor of the Bank of Tanzania to do so are immaterial. The advocate of the appellant further contended that the learned trial Judge having struck out paragraphs 29 and 33 of the plaint, the plaint no longer disclosed a cause of action which was why the trial Judge ought to have dismissed the suit for want of a cause of action and uphold the preliminary objections. The learned advocate for the appellant abandoned ground two · of the appeal. On ground three of the appeal, he contended that the suit is time barred under the provisions of Sections 6 (1) and 26 (c) of the Law of Limitation Act No. 10 of 1971 which provide: 6. For the purposes of this Act - (a) in the case of a suit for an account, the right of action shall be deemed to have accrued on the date on which the last transaction relating to the matter in respect of 6 which the account is claimed took place.

26. Where in the case of any proceeding for· ·which a period of limitation is prescribed (a) (b) ( c) the proceeding is for relief from the consequences of a mistake, the period. of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, or could, with reasonable diligence, have discovered it: It is the view of counsel for the appellant that the period of limitation started running on the 31 st October, 1986 when the obligation to pay fell due. He argued that the action is time barred because it was filed in 1993, six years later, thereby contravening the above Sections 6 (a) and 26 (c) of the Law of Limitation Act. He further submitted that because the respondent failed to pay for the supplied flask spares, the appellant guarantor. of the supply contract -. . . ··- ..... -- ·.··· . . ,_ . -·j • -----------=----------'--'---------=------;:____-=-------'----'----'-----"------'--------- 7 _had no alternative but to debit the respondent's account and pay the due_ sum for the resp_ondent did not petition the High Court to set aside the Arbitration Award which was delivered by the International Court of ·Arbitration on the 30 th November, 1992 in Paris, France. Mr. Rutabingwa cited the case of Patel versus S.M. a_nd N.M. Patel (1960) E.A. 154 wherein the Court of Appeal for Eastern Africa held:- (i) While the summary procedu_re

for ..... enforcement of an award only applied to the award made on a written submission to arbitration, the provisions of Section 15 of the Arbitration Ordinance which relate to the setting aside of an Award are not limited to Awards on a written submission. (ii) the power to set aside an Award in Tanzania must be by an application made under the Ordinance. (iii) Regulation 5 of the Arbitration Rules applies to applications to set aside an 8 award though that award may not have been filed in Court under the Ordinance. It appears to us that Patel's case is jnapplicable in this case for two reasons: a) No petition to set aside · the Arbitration was filed in the High Court; and b) The Arbitration Award is not a subject of this appeal. All in all, Mr. Rutabingwa prayed that the appeal be allowed with costs and the case be remitted to the trial Court for adjudication on the counter-claim. Mr. Mfalila, learned advocate for the respondent,_ urged the Court to dismiss the appeal because the appellant violated Foreign Exchange Regulations, namely Regulations 8, 17 (1) (a) (b), 21 and 25 ( 4) of the 1992 Foreign Exchange Regulations. The effect of the .. . ·•- ' . - said violation, the learned advocate for the respondent contended, is to render the payment transaction a nullity which -was why the learned trial judge justifiably overruled the preliminary objections .. He faulted the

appellant for flouting Foreign Exchange Regulations and also for failing to save the debited money into a blocked account pending the determination of the suit as stipulated in Regulation 21 of the 1992 Foreign Exchange Regulations. Mr. Mfalila further urged the court to uphold the ruling of the High Court because the ~ . appellant guarantor unlawfully paid out the respondent's money ... Learned counsel f(?r the respondent distinguished the case of Patel cited supra on the ground that Patel's case contested the /- i enforcement of an award while the present case disputes the validity of the award and the legality of paying for defective spares allegedly shipped to the respondent by a foreign company. Be it as it may, we have already stated that Patel's case does not apply to the present case. 10 As for the suit being time barred, Mr. Ngalo, learned co- advocate for the respondent, contended that the suit was filed within time because the cause of action arose when the appellant guarantor unilaterally and fraudulently paid the money from the respondent's account sometime in 1992 well before the suit was filed a year later in 1993. He pointed out that fraud had not been exposed or discovered when the debt fell due on the 31 st October, 1986 so the cause of action could not have accrued at that time. Having considered the submissions of the learned advocates for the parties, we

are, for different reasons, of the settled view that the learned trial Judge rightly overruled the preliminary objections. We / are clear in our minds that the suit is not time barred because the cause of action arose in 1992 when the appellant debited the account of the respondent and paid the money in the quantum of Rupees 59,127,958/65 and US Dollars 87,916/67 to J.G. Vacuum Flasks Ltd., an Indian Company. The suit was filed a year after the money was debited and paid _out giving rise to this case. Under the circumstances the action is within time under the provisions of i l.... ~ ' ·• I . ---~.~------.~- ~ ··• 11 Sections 6 (a) and 26 (c) of the Law of Limitation, 1971 which provisions are laid out supra. We agree with the learned trial Judge that the suit is not time barred under Limitation for he stated: " --- As we have seen, what is said to have induced the action against the fourth defendant is the payment that was made to meet the amount decreed in the award. In the circumstances, it seems to me that the six year limitation period has to be reckoned from the day the payment was made, which as _ indicated, was after the delivery of the interlocutory ruling on 11/2/94. I must hold therefore that the suit is not time barred." t'-- 1 I We are further satisfied that the Amended Plaint at paragraphs 29 and 34 and the pleading·s generally established that the respondent has

a cause of action against the appellant. As pleaded in paragraph 29 of the Amended Plaint, the respondent .9lleges that the Guarantee Agreement between the parties to this appeal was bad in law in that the said Guarantee Agreement contravened provisions of the Foreign Exchange Act, 1992 in that appellant being an .., -12 authorized dealer could not act as guarantor .. Paragraph 34 of the Amended Plaint alleges that_ the appellant unilaterally debited the_ respondent's account in the sum of Sh. 59,127,958.65 and US Dollars 87,916.67. To our minds these_ allegations coristitute a cause of action. For that reason, the learned trial Judge rightly held: "--- Still I am satisfied that a cause ·of action exists against the fourth defendant. As shown the~ case which the plaintiff seeks to make against it is basically that the letter of guarantee under which the payment made was void, in that it violated the written Laws of Tanzania---." In view of the above, we are of the settled mind that the learned trial Judge rightly overruled the preliminary objections. Accordingly we dismiss the appeal with costs: ~,--------.---------- ·--···-·-·· . 13 DATED at DAR ES SALAAM this 9th day of October, 2003 . . J.A. MROSO

JUSTICE OF APPEAL E.N. MUNUO

JUSTICE OF APPEAL H. R. NSEKELA

JUSTICE OF APPEAL I certify that this is a true copy of the original. csMra) Ag. SENIOR DEPUTY REGISTRAR