crdb bank ltd vs noorally kj dhanani another 2001 tzhccomd 8 23 august 2001

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION)

AT DAR ES SALAAM COMMECIAL CASE NQ.102 OF 2001 CRDB BANK LIMITED.............................. PLAINTIFF

VERSUS NOORALLY K.J.DHANANI........... 1st DEFENDANT SHIRAZ H.K.J.DHANANI................ 2nd DEFENDANT

RULING NSEKELA, J. The plaintiff in this suit is CRDB Bank Limited. The 1st defendant is one Nooraly K.J.Dhanani and the 2nd defendant is one Shiraz H.K.J. Dhanani. According to the plaint. K.J. Motors Limited (the company) applied for and was granted a temporary overdraft facility by the plaintiff amounting to Tanzania Shillings One Billion Five Hundred Million (Tshs. 1,500,000,000/=) only under an Overdraft Agreement dated 16.2.98. It is alleged in the plaint that on the 23.2.98, the 1st and 2nd defendants (defendants) executed a Guarantee Agreement under which the defendants jointly and severally guaranteed the repayment of the loan incurred by the company from the plaintiff. Apparently, the overdraft facility expired in February, 1999 and the company has defaulted in the repayment of the loan. This default prompted the plaintiff to appoint a Receiver/Manager in order to realize the securities offered by the company to secure the loan. Apart from taking this course of action, the plaintiff instituted this suit on the 24.5.2001 against the defendants on the strength of the Guarantee Agreement they had executed in favour of the plaintiff. On the 15.6.2001 the defendants filed a joint written statement of defence, and on a separate paper, a “ Notice” which in part reads as follows - 1

NOTICE TAKE NOTICE that on the first day of hearing of this suit, the counsel for the defendants shall raise a preliminary point of law that the suit is prematurely filed as per Guarantee Deed and Debenture Deed signed by the defendant in respect of the Overdraft Agreement dated 16th February 1998. ” In view of the fact that Mr. Semgalawe, learned advocate for the defendants had raised this preliminary objection on a point of law, I ordered the learned advocates for the parties to submit written submissions on the point of law involved. This “Notice” has caused me considerable anxiety! Is this “ Notice” a preliminary objection on a point of law according to law? Order VIII rule 2 of the Civil Procedure Code, 1966 provides as follows - The defendant must raise by his pleading all matters which show the suit not to be maintainable, or that the transaction is either void or vbidable in point of law, and all such grounds of defence as, if not raised, would be likely to take the opposite party by surprise, or would raise issues offact not arising out of the plaint, as, for instance, fraud, limitation, release, payment, performance, or facts showing illegality. ” My reading and understanding of this Rule is that if the defendant wants to raise an issue that the suit is not maintainable according to law, then this point must be raised in the written statement of defence. It must be in

the body of the defence and not otherwise. This “Notice” I have referred to is not part and parcel of the defendant’s pleadings. It is my considered view that whatever preliminary point of law the defendant wanted to raise for the court’s consideration should have been in the written statement of defence. This piece of paper called “NOTICE,” in my humble view, contravens Order VIII rule 2 of the Civil Procedure Code and should be discarded. It is not properly before me to adjudicate upon. In the event I am wrong in the view that I have taken above, I move on to consider and determine whether or not there is in fact a preliminary point of law. It is the contention of Mr. Semgalawe, learned advocate for the defendants is that this suit is prematurely before the court. My understanding of this is that the suit should not have been filed at all against the defendants. The reason advanced is that the plaintiff has put 2 the company, K.J.Motors Limited, under receivership and the receivership exercise has not as yet been completed and as such the defendants, as guarantors of the company should not be sued during the pendency of the receivership. It is an interesting submission but I am not persuaded that at this juncture I can dispose of it as a preliminary point of law. There are factual as well as legal issues involved which can only be resolved after evidence has been adduced by

witnesses, evaluated and finally resolved. I am extremely reluctant even to touch on the submissions made by the learned advocates on the issue since this will necessitate my delving into the merits of the whole suit without the benefit of factual evidence which will be available during the trial. The nature of a preliminary objection was succinctly expressed by Law, J.A in the case of Mukisa Biscuit Manufacturing Co. Ltd v West End Distributors Ltd (1969) EA 696 wherein His Lordship stated thus at page 700 - “ So far as I am aware, a preliminary objection consists of a . point of law which has been pleaded, or which arises by clear implication out of the pleadings, and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court, or a plea of limitation, or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration. ” And Newbold, P. put the matter this way at page 701 — “ A preliminary objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the other side are correct. ” (emphasis supplied) It is abundantly cleat that a preliminary objection on a point of law must be pleaded or should arise by clear implication from the pleadings and should deal with pure points of

law that will finally dispose of the suit without embarking upon a trial. In order to decide whether or not Mr. Semgalawe’s contentions are correct in law and should be upheld, I reproduce below paragraphs 3,4 and 5 of the written statement of defence - 3. Paragraph 5 is denied and the plaintiff is put to strict proof. The defendant aver that facility expired in 1999 but K.J.Motors did not breach any clause of the Overdraft Agreement. The defendants were in the process offulfilling all 3 new conditions imposed by the plaintiff to renew the facility, when the plaintiff breached clause 18 of the said Overdraft Agreement, by demanding on 14.9.99 payment of the amount due, to be paid in 24 hours time, and appointed a Receiver Manager on 15th day of September, 1999. The plaintiff did not make and demand in writing in February, 1999 and several reminders thereafter as alleged.....................

4. Para 6 is denied and the plaintiff is put to strict proof. The defendants aver that the demand was for the payment of Tshs 1,499,748,085.02 as of 15.9.99 and for a period of nearly one year and eight months when K.J.Motors was under receivership, the exercise did not reduce the amount claimed. The Bank Statement annexed does not have any supporting papers, as such does not explain what the Receiver and Manager did as per his appointment so as to prove that the sale of K.J.Motors assets did not satisfy the amount demanded plus interest and expenses.

5. Para 7 is admitted and further to what is stated therein, the defendants aver that the securities provided as per Debenture Deed were more than enough to realise the amount due plus all other expenses as provided in the said Debenture Deed, and as such there was no need at all to claim anything from the defendants. " I have quoted these paragraphs simply to show that there are no pure points of law that have been pleaded or that arise by clear implication from the pleadings. Paragraph 3 disputes that the company did not breach the Overdraft Agreement; that the plaintiff did not make a demand in writing in February, 1999. I also gather from paragraph 4 that the amount that is still outstanding is being disputed by the defendants. In paragraph 5, the defendants do not comprehend as to why at all they are being hauled into court for the repayment of the outstanding debt! It is evident to me that the issues raised in paragraphs 3,4 and 5 of the written statement of defence are not pure points of law. No doubt at the end of the day, they may raise interesting points of law to be resolved but this is not the occasion to do so. The issues raised cannot be answered, as stated before, without ascertaining the factual background of the suit and construing the agreements involved. In the result, I do hereby dismiss with costs, the preliminary objection dated the 15.6.2001. It is

accordingly ordered. 4 H.R.Nsekela, Judge 23.8.2001 Ruling delivered in the presence of Mr. Mwandambo, learned advocate for the respondent/plaintiff and Mr. Nooraly K.J. Dhanani, the 1st applicant/defendant and Mr. Semgalawe learned advocate for the applicants. H.R.Nsekela, Judge 23.8.2001 Order: As the pleadings have now been completed and the application has been disposed of, mediation to be held on the 3.10.2001. The parties have opted for Speed track one and there are no further applications to make. H.R.Nsekela, Judge 23.8.2001 •;s a trae aa j Correct ;iStwr Commercial Court Dar es Salaam Dated -5 of . y 5