CIVIL APPEAL NO

AT DODOMA f CO RAM: KEREFU. 3.A.. FI KIRIN I. 3.A. And MASOUP. J.A.1 CIVIL APPEAL NO. 200 OF 2016 DAVID JOSEPH MAHENDE............................................................APPELLANT

VERSUS AFRISCAN GROUP (T) LTD........................................................ RESPONDENT (Appeal from the Judgment and Decree of the High Court of Tanzania, Commercial Division, at Dar es Salaam) (Sonqoro, J.) dated the 15th day of December, 2015 in Commercial Case No. 86 of 2013

JUDGMENT OF THE COURT 10th & 18th February, 2025. FIKIRINI, J.A.: The appellant, David Joseph Mahende, has filed an appeal against the decision made by the High Court of Tanzania, Commercial Division, in Commercial Case No. 86 of 2013, which was ruled in favour of the respondent, Afriscan Group (T) Ltd. Dissatisfied with the judgment, the appellant seeks to challenge the decision. The dispute centres around the formation and operations of Afriscan Construction Company Ltd, a company founded in 1990 by the appellant, Saidi Abdallah Msangi, and Afriscan Group (T) Ltd. The ownership of shares was initially as follows: the appellant held 40 shares, Saidi Abdallah Msangi held 20 shares, and Afriscan Group (T) Ltd held 40 shares. The company was involved in various government projects. In 1991, Afriscan Group (T) Ltd transferred its shares to Farida Nilsson, and since then, the respondent ceased to be a shareholder in Afriscan Construction Company Ltd. Over time, the company faced financial difficulties, leading to a need for capital injection. Ulf Nilsson, by then a member, agreed to contribute additional funds, while the appellant allegedly agreed to sell and transfer 10 out of his 40 shares. This agreement was purportedly discussed in a joint shareholders meeting held in September, 2000 at the company's office in Kamata. However, the appellant contests this claim, arguing that he

did not participate in the meeting on 15th September, 2000, nor did he sell or transfer any shares. He asserts that he still heid all 40 shares, as reflected in the Business Registration and Licensing Agency (BRELA) records. Displeased with the appellant's refusal to acknowledge the sale of shares and the delays in realizing an arbitral award, the respondent filed a lawsuit claiming general damages, costs, and interest on the decretal sum at the court rate of 12%. In response, the appellant vigorously denied the respondent's claim, arguing that the signatures on documents pertaining to the purported sale were forgeries. During the trial, the following issues were to be determined: 1. Whether the appellant lawfully sold and transferred 10 shares to Afriscan Group (T) Ltd.

2. I f the sale occurred, whether the respondent suffered any damages as a result o f the appellant's denial.

3. What reliefs, if any, the parties were entitled to. Four witnesses testified for the respondent, including Ulf Nilsson (PW1), Raymis Zakayo (PW2), Farida Nilsson (PW3), and Detective Sergeant Johannes Joseph Muganyi (PW4). The appellant's defence included David Joseph Mahende (DW1) and Saidi Abdallah Msangi (DW2) testimonies. Several documents were presented in evidence: Exhibit PI: Memorandum and Articles of Association of Afriscan Construction Company. Exhibit P2: Certificate of Incorporation. Exhibit P3: Transfer of the appellant's shares and a Tanzania Revenue Authority (TRA) receipt. Exhibit P5: Minutes of the 15th September, 2000 meeting, where the sale and transfer of shares allegedly occurred, and Exhibit P6: A handwriting expert's report verifying the authenticity of document signatures. The appellant disputed the authenticity of the signature in Exhibit P5, arguing that it was forged. He also pointed out that there were no changes in the Memorandum and Articles of Association (Exhibit PI) and that BRELA records showed no alterations to the ownership structure. He further claimed that the respondent and Ulf Nilsson were trying to interfere with his interests in the company. Despite the appellant's objections, the trial Judge found in favour of the respondent. The trial Judge concluded that the appellant had sold and transferred 10 shares to the respondent. The court

ruled that while the sale and transfer did not fully adhere to the procedural requirements outlined in the company's Articles of Association, which was still valid, binding, and enforceable. The appellant has now filed this appeal, raising five main grounds: 1. That, the learned trial Judge erred in law and fact in entertaining the invalid suit, having been expired on 24* September, 2014 without any order extending the same.

2. That, the learned trial Judge erred in law and fact in admitting the inadmissible documentary evidence, to wit, exhibit P5 and P6, and further erred in law when he relied upon the same to enter judgment in favour o f the respondent 3. That, the learned trial Judge erred in law and fact in holding that the purported meeting on 30th September, 1998 and l$ b September, 2000, which allegedly deliberated on the sale and approval o f his 10 shares held in Afriscan Construction Co. Ltd to Afriscan Group (T) Ltd, were invalid meetings.

4. That the learned trial Judge erred in law and fact in holding that the purported Board Resolutions made in the meetings attended, chaired, and voted for by Ulf Nilsson, a non - shareholder and non-director, was valid and effectual towards transacting the sale o f shares by the appellant to the respondent 5. That, the learned trial Judge erred in law and, in fact, in holding that the alleged sale o f 10 shares of the appellant to the respondent, which sale flouted the law and procedures that govern the sale and transfer o f shares, was valid. Prior to the hearing date, Mr. Mbamba had lodged a notice pursuant to rule 113 (1) of the Tanzania Court of Appeal Rules, 2009 (the Rules) requesting for leave to argue on additional ground of appeal, which states "In so far as the trial court's judgment was wholly based on exhibit P6, which was falsely said to have been sourced from the Forensic Office, which office disowned it, the said judgment was obtained by falsehoods/fraud, and by reason o f falsehood/fraud, the same cannot stand, for whatever reasons." On the date set for hearing in attendance were Mr. Samson Mbamba, learned advocate appearing for the appellant and Mr. Joseph Rutabingwa, learned advocate appearing for the respondent. The learned advocates adopted written submissions, and a list of authorities filed on behalf of their respective parties. Mr. Mbamba commenced his

address by urging the Court to grant leave permitting him to argue an additional ground of appeal, the prayer which was not objected to by Mr. Rutabingwa and was granted by the Court. He then informed the Court that he was abandoning the first ground of appeal, replacing it with the additional ground in which leave has been sought and granted. Before us, the appellant seeks to overturn the High Court's decision, challenging the validity of the evidence and procedures used at the trial. We have gone through the submissions, though we will not reproduce them. Certainly, we will consider them in the course of determining whether the appeal is meritorious. The standard of proof in a civil suit, is on the balance of probabilities, meaning that the court must determine which evidence is more credible. In the case of Mary Agnes Mpelumbe (In her capacity as Administratrix of the Estates of the late Isaya Simon Mpelumbe) v. Shekha Nasser Hamad, (Civil Appeal No. 136 of 2021) TZCA 667 (5th November 2021), the Court explained that the burden of proof rests on the party who makes the allegation, as stipulated in section 110 of the Evidence Act, Cap. 6 R.E.

2019. It went on to state that the standard of proof in civil cases requires evidence that outweighs the opposing party's evidence on the balance of probabilities. The Court emphasized that the burden of proof does not shift to the opposing party unless the party with the burden fails to meet it. Similarly, in Mathias Erasto Manga v. Ms. Simon Group (T) Limited (Civil Appeal No. 43 of 2013) [2014] TZCA 291 (19th March, 2014; TANZLII), the Court had previously held that the available evidence must tilt the balance in one direction in civil cases. The Court further explained that requiring corroboration, as done by the trial court in that case, goes beyond the standard of proof in civil litigation. The dispute in this appeal revolves around the appellant's alleged transfer of 10 shares to the respondent, Afriscan Group Ltd. As a result of this transfer, the appellant, initially holding 40 shares, would be left with 30 shares in the company. Essentially, the appeal hinges on the validity of this purported share transfer, which the appellant disputed. He thus challenges the decision of the High Court, raising several grounds related to the evaluation of evidence concerning the transfer of shares and the reliance on Exhibits P5 and P6. Shares in a company are considered movable property, and their transfer must comply with the company's Articles of Association and the Company Act,

Cap. 212 Revised Laws (the Act). For a transfer to be valid, the company must first provide a right of first refusal to its existing members. The Articles of Association typically specify the process for the transfer of shares, including approval by the company's directors and members and adherence to specific notice requirements. The Memorandum and Articles of Association (Exhibits PI and P2) govern the company's operations. The appellant argued that there was an invalid sale and transfer of shares after PW1, who was not authorized to convene such a meeting, chaired a shareholders’ meeting. The Articles of Association clearly specify that only company directors or members can convene meetings. However, PW1, who had ceased to be a member after transferring his shares to Farida Nilsson in 1991, did so without the mandate. As per the testimony of PW1, he admitted that in 1991, he transferred all his shares in Afriscan Construction Company Ltd to Farida Nilsson to enable the company to maintain a majority local ownership, a statement which was not refuted during the hearing. We agree with Mr. Mbamba's submission that the meeting chaired by PW1 was invalid because PW1 was neither a shareholder nor a director of the company at the time. Article 5, which adopted Articles 39 and 53 of Table A to the Act, mentioned that the company's directors or two members or requisitions are the

persons capable of convening a company meeting. PW1 was the one who convened the purported shareholders' meeting. He was neither a company director nor a shareholder after he sold and transferred his 40 shares in Afriscan Construction Co. Ltd to his wife, Farida Nilsson (PW3). He indeed had a right to oversee his wife's interests but not to the extent of interfering with the company's operations and affairs. Additionally, under Article 45 of Table A, the meeting is required to be chaired by the chairman of the Board of Directors. Since PW1 had ceased to be a member, he had no mandate to chair the purported meeting. Therefore, the Board Resolution (Exhibit P5) sanctioning the sale and transfer of shares was invalid and could not transfer any legal title of shares to the respondent. Equally, the respondent's counsel argument that PW1 on page 304 confirmed being the managing director of Afriscan Construction Co. Ltd, and the appellant, when cross-examined as indicated on pages 638 and 639 of the record of appeal, affirmed that he had referred PW1 as director and managing director, as he did not know PW1 had ceased to be. Even if we assume that the appellant referred to PW1 as such, we say he had no authority to confer a mandate on PW1 to be a managing director or director mandated to convene a shareholders' meeting. Besides, that could not supersede the provisions in the Articles

of Association, the legal instrument that governs the company's day-to-day operations. Reliance on that evidence to validate PWl's mandate of convening the purported meeting is unfounded. Moreover, PW1 had ceased to be so right after transferring his shares to PW3. What is more, the transfer of shares contrary to the procedure laid down was prohibited. Article 4 of the Articles of Association prohibited the transfer of shares to a non-member unless existing members were first given the opportunity to purchase the shares. Article 4 (a) states thus:- Subject to Clauses 2 and 3 hereof, the right of members to transfer their shares shall be restricted as follows: "(d) No share shall be transferred to a person who is not a member so long as there is a member or any person selected by the Directors as one who is desirable in buying the shares. AH shares transfers shall be confirmed by the Board o f Directors. In addition to the illegally convened meeting, Article 4 (b) states that the shareholder who desires to sell the shares must give notice in writing to the directors. The 21 days' notice was required, as illustrated in Article 40 of Table A and Article 4 (c) of the Articles of Association, but no evidence was given to prove that the notice was given as required. Therefore, Exhibit P5, which purportedly authorized the sale and transfer of shares, cannot be deemed valid, as it

resulted from an invalid meeting convened by a non-member. The respondent's counsel, Mr. Rutabingwa, argued that the requirement for a 21-day notice was not explicitly stipulated in the Articles of Association. This assertion is refuted, as Article 4(c) stipulates that shareholders intending to transfer their shares must notify the directors in writing within 21 days prior to the meeting. Furthermore, while Article 5 allows for a shorter notice period, it also sets out the standard for convening meetings. Therefore, even if the notice period could be shortened, the requirement for prior notice of at least 21 days remains enforceable and propriety of who can convene the meeting is a procedure which must to be observed. We hold that the entire process surrounding the meeting, the board resolution, and the transfer of shares was fatally flawed due to the invalidity of the meeting convened by PW1. The Articles of Association, which govern the transfer of shares, were not adhered to, and as such, the sale and transfer of 10 shares cannot be considered legally binding. Exhibit P5, being the result of the invalid meeting, cannot be recognized as an ii effective instrument for the transfer of shares. Therefore, our re-evaluation of the disputed signatures in Exhibit P5, which called for a handwriting expert opinion resulting in Exhibit P6, would be a redundant and academic exercise,

which we refrain from embarking on. Coming to the judgment, our views are the trial Judge's consideration, as found on page 785 of the record of appeal, that "restriction on the sale of share is just a control, and "is not a "bar" or "prohibition" on the transfer of share to an outsider like Afriscan Group" was valid, is flawed. We say so because if there is an instrument governing the company's operation, such as a Memorandum and Articles of Association, which are like the constitution of the company, conforming to what has been provided is a must and not an option, as observed by the trial Judge unless otherwise stipulated. Similarly, his decision to rely on Exhibit P5, which resulted from the invalid meeting convened, was incorrect since the alleged Board Resolution resulted from an invalid meeting. We strongly opine that no legal transfer of shares occurred, and the judgment entered in favour of the respondent should not be left to stand. After evaluating the evidence and considering the arguments presented, we conclude that the sale and transfer of shares violated the procedural requirements outlined in the company's Articles of Association, 12 and the meeting convened to authorize the transfer was invalid ab initio, making the sell and transfer invalid, not binding, and unenforceable. Consequently, we find the appeal is meritorious and allow it with costs. DATED at DODOMA this 17th day of February, 2025. R. J. KEREFU

JUSTICE OF APPEAL P. S. FIKIRINI

JUSTICE OF APPEAL B. S. MASOUD

JUSTICE OF APPEAL The Judgment delivered this 18th day of February, 2025, in the presence of Mr. Samson Mbamba, learned counsel for the Appellant and in the presence of Mr. Joseph Rutabingwa, learned counsel for the Respondent via Video Conference from Dar es Salaam, is hereby certified as a true copy of the original.