20171019 TZHC Dodoma2

IN THE HIGH COURT OF TANZANIA

AT DODOMA LAND APPEAL NO. 6 OF 2017 (From the Decision of the District Land and Housing Tribunal of Dodoma District at Dodoma, in Land Application No. 105 of 2014) CRDB BANK PLC .............................................................. APPELLANT

VERSUS DOMINIC SINARE MARANDU ......................................... RESPONDENT

JUDGMENT 25/09/2017 & 19/10/2017. A. MOHAMED, J. - The crucial -question for determination in this appeal is whether section 138 ( 1) of the Land {Amendment) Act No. 5 of 2004 modified the law pertaining to the discharge of a mortgage by a mortgagor after prior sale by a mortgagee to a bona fide purchaser for value. On 16/8/2014, the respondent was the successful bidder in an auction conducted by the appellant bank of a landed property described as Plot No. 2 Block J Area D in Dodoma Municipality for a price of 50,000,000/= shillings. He immediately paid a down payment of 30,000,000/=. The balance of 20,000,000/= was to be paid within fourteen (14) days. Two days later, the appellant bank notified the respondent the defaulter had paid off the loan and discharged the 1 mortgage and required the respondent to collect a cheque for the refvnd of the advance purchase price. In an action, the District Land and Housing Tribunal for Dodoma ("the trial tribunal") found there was a breach of contract and entered judgment for the respondent and ordered the appellant to pay 20,000,000/= shillings as damages for breach of contract being "assessed general damages for inconveniences (sic) and mental torture caused by the applicant and loss of monies since 16/8/2014" and attendant costs of the suit at a court rate of 7% from the date of judgment to final payment. Against that decision the

appellant appeals on two grounds namely; the trial tribunal erred in interpretation and application of the law by holding there was a breach of contract by the appellant; and secondly, that the trial tribunal erred in awarding the respondent an overstated sum of general damages of 20,000,000/= shillings. Mr. Kizigha, learned counsel for the appellant, in his written submissions argued that under section 138 ( l) of the Land (Amendment) Act No. 5 of 2004, the discharge to the mortgagor was valid and lawful. He went on to say the appellant notified the respondent of the discharge and his down payment of 30,000,000/= was immediately made and accepted by the respondent . . It was the counsel's argument the mortgagor discharged the mortgage before the sale was completed. According to him, the 2 purchaser (respondent) had not completed final payment of the 20,000,000/= million shillings and even if he had done so, the mortgagor still by law could discharge the mortgage before transfer of the title had been executed. The counsel assailed the trial tribunal's interpretation of section 16 of the Mortgage Financing (Special Provisions) Act no.17 of 2008 that provides; "(5) A person referred to under subsection (1) whether acting for himself or by or through the mortgagee from whom that person obtained the mortgaged property immediately upon acceptance of a bid at a public auction or

contract of sale of that mortgaged property" It was the counsel's view the above provision gives the purchaser the right to possession only, and not ownership. He argued the correct interpretation is that ownership of the property remains with the mortgagor subject to the conclusion of transfer of title by the purchaser to establish ownership. In brief, his understanding of section 138 ( 1) of the Land (Amendment) Act No. 5 of 2004, is to the effect that a mortgagor can discharge his mortgage before ownership passes to a purchaser. As to the 2nd ground, it was the counsel's submission the respondent's down payment of 30,000,000/= was refunded the 3 following day after the mortgagor discharged the mortgage. And therefore the respondent did not suffer any inconvenience or mental torture for such a short time to warrant his being awarded 20,000,000/= shillings as general damages since he suffered no tangible material or financial loss because of the cancellation of the auction transaction. In opposing the· 1st ground of the appeal, Mr. Mselingwa for the respondent argued that section 138 ( 1) of the Land Act [Cap. 113 R.E 2002] indeed protects the mortgagor from discharging the mortgage any time before an agreement is reached between a mortgagee and a purchaser for the mortgaged property. However, he argued, there is no law that exempts the appellant (mortgagee) from breach of

contract when the mortgagor discharges the mortgage where the subject matter has been sold to a bona fide purchaser. It was his view, the Parliament did not intend to exempt a mortgagee from breach of contract where he has sold off a mortgaged property and discharged the same to the mortgagor. In s~pport of his proposition, he cited section 10 of the Law of Contract Act [Cap. 345 R.E 2002]. He said the parties entered into a contract by their free consent, for a lawful consideration and with a lawful object. He argued the remedy for breach of contract under 4 section 73 of the Law of Contract Act was payment of specific and general damages. As to the 2nd ground, the counsel stressed the respondent suffered inconvenience and mental torture and therefore the trial tribunal's finding on award of damages was proper. In support of this position he cited Haji Associates Company (T) Ltd and Another v. John Mlundwa [1986] TLR 107. Finally, it was the counsel's view the quantum of damages awarded was reasonable and prayed the trial tribunal's decision be upheld. Having reviewed the_ !ri~I _ trib~n9l~s r~cgrd _aod ..after. - - -- ~ - - considering the parties' contentions, I state those of the appellant merit my acceptance. In regard to the 1st ground of appeal, I do agree with the appellant's counsel that the trial tribunal erred in interpretation and application of the law by holding

there was a breach of contract by the appellant. I think this was the situation before the amendment as provided in section 138 ( l) of the Land (Amendment) Act No. 5 of 2004. In essence, this provision abolished the right of foreclosure by a mortgagee existing in law prior to the amendment where a mortgagee could not discharge the mortgage even if he were able 5 and willing to do so. In my view, the proper import of this section is that a mortgagee can discharge his mortgage even after a sale to a bona fide third party purchaser by a mortgagee even if the sale is complete. In the instant case, the sale was not even complete as the respondent had not yet settled the final payment. After so finding, I am of the view there was no breach of contract by the appellant in cancelling the sale of the mortgaged property to the respondent since the appellant was simply abiding by the law. I think there would be a breach of contract where a mortgagee does not deliver ownership to a purchaser after sale in a situation where a mortgagor does not wish or is unable to discharge the mortgage. In regard to the question of ownership vide the learned trial magistrate's interpretation of section 16 of the Mortgage Financing (Special Provisions) Act No. 17 of 2008, with respect, I disagree that it in any way conferred ownership to the respondent. The subsection is an amendment added to section 135

of the Land Act (Cap 113 RE 2002). It reads: "(5) A .person referred to under subsection (1) whether acting for himself or by or through the mortgagee from whom that person obtained the mortgaged property immediately upon acceptance of a bid at a public auction or contract of sale of that mortgaged property" 6 Conversely, I do agree with Mr. Kizigha's contention that the provision simply refers to the right of possession by a purchaser after conclusion of a sale by the mortgagee. The above provision does not in -any way confer ownership as transfer of ownership is an entirely distinct legal procedure under the law which is irrelevant to discuss here. After the foregoing, I find the ground devoid of merit and it is dismissed. Having found the there was no breach of contract by the appellant, I think the trial tribunal manifestly erred in awarding general damages of 20,000,000/= shillings. The respondent suffered minimally as he was refunded his advance payment within 3 days after the auction. He cannot say he suffered immensely in either financial or psychological terms. However, I think the respondent did suffer psychologically as his expectation of ownership of the suit property was prematurely clipped. And indeed he made arrangements for attending the auction and thereafter to collect his cheque of the down payment refund from the appellant bank which disrupted his schedule or plans. In these circumstances, I would award him 5,000,000/= shillings (five million) under the head of "any other relief the court deems fit 7 to grant". Each party is to bear its costs in the circumstances of this peculiar case. It is so ordered. A. MOHAMED

JUDGE 19/10/2017 The right of appeal explained. A. MOHAMED

JUDGE 19/10/2017 8