RULING MISCELLANEOUS COMMERCIAL APPLICATION NO

N THE HIGH COURT OF UNITED REPUBLIC OF TANZANIA (COMMERCIAL DIVISION) AT DAR ES SALAAM MISCELLANEOUS COMMERCIAL APPLICATION NO. 52 OF 2023 CASE REFERENCE NO. 20230411000491102 EAST AFRICAN DEVELOPMENT BANK ............................................APPLICANT Versus HOOD TRANSPORT COMPANY LIMITED………………....................RESPONDENT RULING Date of last order: 04/10/2024 Date of Ruling: 14/02/2025 GONZI, J. The instant application was brought under sections 12(7), 13 (2) (b) and 13 (4) (b) of the Financial Leasing Act CAP 417. The Applicant prayed for the following orders against the Respondent: (a) That the Honourable Court be pleased to grant an order for recovery and/or repossession of the following leasing equipment by the applicant in possession of the respondent namely: 1 S/ MAKE BODY REGISTRATIO MODEL CHASSIS TYPE N N NUMBER 1. SCANIA BUS T 746 AVL F94 9BSF4X2000 3621853 2. SCANIA BUS T 773 AVL F94 9BSF4X2000 3622398 3 SCANIA BUS T 779 AVL F94 9BSF4X2000 3621837 4 SCANIA BUS T 751 AVL F94 9BSF4X2000 3622416 5 SCANIA BUS 781AVL F94 9BSF4X2000 3622408 6 SCANIA BUS T 405 AHB F94 9BSF4X2000 3555793 7 SCANIA BUS T501 AHB F94 9BSF4X2000 3558591 (b) Sequel thereto the respondents be ordered jointly and severally to indicate and show the location of the equipment referred to in prayer (a) for repossession by the applicant. (c) The respondent be condemned to pay the costs of this Application. The application is supported by an affidavit of Mr. Donald Parmena Sumary, Principal Officer of the Applicant Company. In his affidavit, he 2 stated that on 22nd October 2007, the Applicant entered into a financial lease agreement with the Respondent whereby the Applicant purchased the 7 equipment (Scania Marcopolo Torino Buses) listed in serial numbers 1 to 7 above for the purpose of leasing the same to the Respondent. The applicant annexed a copy of the Financial Lease Agreement with the Respondent as annexture EADB-1. He also attached the registration cards of the equipment listed as annexture EADB-2. The applicant stated further that by the time the lease agreement was coming to an end after the agreed 35 months of its life, the Respondent was still indebted to the Applicant as they had defaulted to pay the agreed rentals and had never exercised an option to purchase the leased equipment. He attached the correspondences between the Applicant and the Respondent on this subject as annexture EADB-3. The Applicant filed Commercial Case No. 132/2016 so as to recover lease rental arrears whereby the Applicant obtained a Judgment and decree of this Court in its favour. He attached the Judgment and Decree of this Court in Commercial Case No. 132/2016 as Annextures EADB-4 and EADB-5. The Respondent was aggrieved by the Judgment and Decree and therefore preferred an Appeal the Court of Appeal of Tanzania. The Court of Appeal of Tanzania in its decision in Civil Appeal No. 262 of 2019 confirmed the 3 decision of the High Court. It was stated further that the Respondent has not satisfied the decree and has not surrender the seven buses leased to her by the Applicant despite being notified to surrender the same. It was stated further that the Applicant could not attach the said buses in execution of the decree in Commercial Case No132/2016 as the buses belong to the Applicant. Therefore, the Applicant resorted to the remedy under the lease agreement for repossession of the leased properties, hence brought this application in this Honourable Court for recovery or re-possession of the said buses. When the Respondent was served with the Chamber application and affidavit resisted the same through the Counter Affidavit affirmed by Mr. Majura M.A. Magafu, Advocate. The respondent stated that she owes nothing to the Applicant as she never defaulted to pay the agreed rentals as such. The Respondent stated that all the rentals were paid in full. The respondent attached annexture HTCL 1 being a copy of account statement of the Respondent with the Applicant in respect of the lease agreement in question, as proof of payment thereof. Mr.Magafu deposed that initially there were three respondents in the case, however, the names of the other two were struck off by this Honourable Court through the Ruling dated 4 21/09/2023 after the Respondent had raised a preliminary objection that the two were not parties to the lease agreement between the Applicant and the Respondent. Mr. Magafu further deposed on behalf of the respondent that the Respondent disputes the allegations that the respondent refused to the settle the decree as issued by the Court of Appeal in Civil Appeal No. 262 of 2019. He stated that the Respondent challenged the ownership of the said buses via Civil Review Number 429/1 of 2022. He went on to state that that Annexture EADB 1 is not concerned with the alleged properties mentioned because annexture EADB 2 reveals that the buses mentioned are jointly owned by the Applicant and the Respondent. Mr. Magafu went on to depose that the application for Review No. 429/01 of 2022 of the Judgment of the Court of Appeal regarding the Court of Appeal’s decisions in Civil Appeal No. 262/2019 dated 21/06/2022, was delivered on 20/02/2024, and the application was dismissed thus the Application at hand can proceed. The hearing of the Application proceeded by way of written submissions. The Applicant was represented by Mr. Gabriel S. Mnyele, 5 Learned Advocate. The Respondent enjoyed the services of Mr. Elinas E. Kitua, Learned Advocate. I thank both Learned Counsel for their useful submissions. Mr. Mnyele, adopted the affidavit of Donald Parmena Summary, the Principal Officer of the Applicant and submitted that the right to repossess is both contractual and statutory. He submitted that under the contract (EADB- 1) the lessor may repossess the equipment leased if there is a default which is not remedied within 14 days as under clause 16.0. He argued that if the lease is terminated by expiration of time or otherwise, the lessee (respondent) must return the equipment, failure of which the same may be repossessed. He submitted, further, that it was also required that the equipment were to be returned to the lessor upon expiry of the lease agreement unless there was a renewal of the lease or the lessor had agreed that the equipment may be purchased by the lessee. In this case, Mr. Mnyele argued, there is no dispute that the lease expired and it was never renewed. He argued further that there was no agreement for the lessee to purchase the equipment leased as provided under Section 13 of the Financial Leasing Act CAP 417. He submitted, further, that section 13 of the Act is the relevant 6 and enabling provision of the law that grants statutory powers to the lessor to repossess the equipment upon expiry of the financial lease agreement. Mr. Mnyele submitted further that according to section 13(4) of the Act, the lessor is obliged to give a due notice before repossession. He argued that the notice was furnished to the respondent and was duly received by the advocates for the respondent, however, it was not complied with. Mr. Mnyele argued that the law provides for two approaches to repossession either direct repossession with a condition that in doing so the lessor does commit a breach of peace or indirect repossession by applying for an order for repossession or recovery of the leased assets before the Court. Mr. Mnyele, Learned Advocate, argued that the Applicant in this case opted for the second option to avoid any acrimonious situation. He referred the court to the case of STANBIC BANK TANZANIA LTD VERSUS WINNERS COMPANY LIMITED CIVIL APPEAL NO 12/22 (MUSOMA HIGH COURT REGISTRY) AND KILIMANJARO TRUCK COMPANY LIMITED VS TATA HOLDING TANZANIA LTD, COMMERCIAL CASE NO 76/2015). 7 Mr. Mnyele, Learned Advocate, further argued that by opting for this approach, the order for repossession or recovery would be enforced under the provision of Order XXI of the Civil Procedure Code [Cap 33 R.E 2019]. He cited as reference the case of JONAS JOSHUA BUSHAMBALI VERSUS EQUITY FOR TANZANIA LTD (EFTA) DC CIVIL APPEAL NO 23 OF 2020. It was submitted by Mr. Mnyele, Learned Advocate, that as per the affidavit supporting the application, the right to repossess exists as the lease has already expired and that the respondent has not exercised her optional right to purchase and absence of renewal of the said lease agreement. He reasoned that if the application is not granted, the applicant's rights to repossess the said equipment will be denied. Mr. Mnyele, Learned Advocate, referred to the Counter Affidavit in paragraphs 3, 4, and 6 where the respondent suggested that the arrears have been paid fully. He retorted that in paragraph 5 of the counter affidavit, the respondent stated that she never refused to settle the decree of the Court of Appeal thus it is vivid that the respondent has not satisfied the decree yet and the law allows the applicant, as the lessor, to repossess the equipment leased and pursue other remedies. 8 It was submitted by Mr. Mnyele that the existence of the decree is not a bar for repossession due to the fact that the residual value of the equipment was not contested on the decree. It is only the defaulted amount that was decreed. He concluded by praying for the application to be granted with costs. On the other hand, Mr. Elinas E. Kitua, Learned Advocate for the Respondent, submitted in reply that the Financial Leasing Act (Act No.5 of 2008) deals with leasing. He argued that the ownership of the leased equipment rests only with the Lessor. He went on to argue that section 3 of the Act defines the term “financial lease” and Section 4(4) of the Act provides that the lessor shall be exclusively the owner and retainer of full tittle of the leased asset during the leasing period thus contrary to what is annexed by the Applicant in annexure EADB 2 which shows that the seven buses are jointly owned by both the Applicant and the Respondent. Mr. Kitua, Learned Advocate, further argued that since the ownership cards (annexure EADB 2) show that the seven leased vehicles are co-owned by the Applicant and the respondent, it means that the mentioned seven buses do not relate at all to the financial lease in question. He argued that if the same were owned in connection with any financial lease, they could have 9 only contained the names of the Applicant as, legally speaking, the leased properties are exclusively owned by the Lessor, not jointly owned between the Lessor and the Lessee as it is the case with the seven leased motor vehicles in this case. He argued that the vehicles/buses whose ownership cards are annexed by the Applicant in Annexure EADB 2, might be of another project and not related to the financial lease in this application. Mr. Kitua, Learned Advocate, urged the court to invoke the provisions of the Financial Leasing Act to declare that an application for repossession of a co-owned property is bad in law hence the Application is incompetent as the Financial Leasing Act does not deal with co-ownership of projects/properties rather a lease arrangement wherein the Lessor remains the owner. Mr. Kitua, Learned Advocate, argued that the contract mentioned as annexure EADB1 is not in connection with the vehicles mentioned in Annexure EADB 2. He submitted that the said vehicles are mentioned nowhere in the contract and that the buses to which the cards are annexed as Annexture EADB 2 are co-owned. He reasoned that linking the two and invoking the provisions of the Financing Leasing Act is an invalid move. 10 Mr. Kitua, Learned Advocate, also referred to Annexure HTCL1 the loan account statement of the Respondent with the Applicant in respect of payment of rentals under the lease agreement which has resulted into this case. He submitted that if the court assumes that the said lease was in connection with the buses so annexed, a fact which is denied by the Respondent, it should find that the whole amount had already been settled by the Respondent and that the Applicant is using the court to deprive the Respondent his properties on the already settled loan. He submitted that if the Respondents will be condemned to surrender the said buses for which it has fully paid, it will be an injustice. He prayed for the application to be dismissed with costs. By way of rejoinder, Mr. Mnyele Learned Advocate, submitted that there are three issues raised in the reply submissions. The first one is on interpretation of sections 3 and 4 of the Financial Leasing Act with regards to who is the owner of leased equipment during the life span of the lease. Secondly, whether the equipment subject to this application are those subject to lease agreement annexed as annexure EADB-1 to the affidavit in support to the application? Lastly, whether the equipment subject to this application have been fully paid up for. 11 Mr. Mnyele prayed for the first two points to be disregarded as they are factual statements from the bar which do not feature in the affidavits. He argued that it is a generally accepted principle of law that submissions are not meant to adduce new factual issues rather they are meant to elaborate the applicability of the law to the factual position already in the records. Mr. Mnyele, Learned Advocate, submitted that in their submission in chief the lease agreement under review preceded the enactment of the Financial Leasing Act. He argued that the respondent erroneously submitted that the leased buses are jointly owned by the Lessee and Lessor as per EADB-2 thus are not the buses that were acquired by virtue of EADB-1. Mr.Mnyele, Learned Advocate, submitted that the said proposition is an afterthought as implicitly, reading the counter affidavit wholesomely, the respondent has conceded in no uncertain terms that the equipment in the annexed cards were acquired by virtue of the lease agreement and she boldly asserted that they were fully paid up for, forgetting that there is a decree showing the extent of liability decreed in Commercial Case No. 132/2016 and confirmed in Civil Appeal No. 262/2019. 12 Mr. Mnyele argued that, in law, the applicant cannot attach the leased equipment as they belong to the Applicant. Therefore, the only remedy is to exercise the contractual and statutory right to repossess the leased equipment. Mr. Mnyele further rejoined that in presence of the decree, the issue of full payment or otherwise cannot be raised now in the application. He urged the court to allow the application with costs. That marked the end of the submissions by the Learned Counsel for both sides. After going upon the rival submission by the Learned Counsel, in essence, it is not disputed that there was a financial lease agreement dated 22nd October 2007 between the Applicant as the lessor and the Respondent as the lessee whose life span was 35 months from the date of delivery of the first equipment by the Applicant to the Respondent. Equally, it is not disputed that the Respondent was the Lessee under the Financial Lease Agreement in respect of which the Applicant, as the Lessor, had financed the acquisition by the respondent, of the listed buses for the use of the lessee. The lessee under the Financial Lease Agreement which was attached to the affidavit as annexture EADB-1, had an obligation to pay monthly rental 13 amounts for 35 months from the date of delivery of the first equipment to be leased. The financial lease agreement also had an option for the lessee to purchase the machines and equipment under Clause 22.0 thereof. Also, it is not in dispute that the Respondent defaulted to pay some of the agreed monthly rental amounts within the 3-years period of the lease agreement. That made the Applicant institute Commercial Case No.132/2016 in this Court against the Respondent. In Commercial case No.132/2016 wherein the Applicant was the Plaintiff and the Respondent was the Defendant, the following reliefs were claimed and I quote verbatim: “(a) Payment of USD 776,282.98. (b) Interest on (a) above at the rate agreed in terms of the lease agreement from the date of filing of the suit to the date of judgment and thereafter interest on the decretal amount to the date of final settlement of the decree. (c) General damages as may be assessed. (d) Costs of the suit, and (e) Any other reliefs this Honourable Court may deem it fit to grant.” 14 During the hearing of the Commercial Case No.132/2016, three issues were framed by the Court namely that: “(i) Whether there was a breach of the lease agreement by the defendant. (ii) If the first issue is answered in the affirmative, whether the said breach was remedied by the Defendant. (iii) To what reliefs are parties entitled to.” In the Judgment delivered on 22nd May 2019, this Court (Hon. Phillip, J.), entered Judgment and Decree in favour of the Applicant (the Plaintiff in that case), that: “From the foregoing, I hereby enter Judgment for the Plaintiff as follows: (i) The Defendant shall pay the Plaintiff a sum of USD 776,282.98 being arrears of rentals, interests and penalties. (ii) The Defendant shall pay the Plaintiff interest on the decretal sum in item (i) above at the rate of 9.99% per annum from the date of filing this case to date of Judgment. 15 (ii) The Defendant shall pay the Plaintiff interest on the decretal sum at the court rate of 7% per annum from the date of Judgment to the date of full payment. (iv) The Defendant shall pay the Plaintiff the costs of this case.” The Judgment and Decree of this Court were challenged on appeal to the Court of Appeal of Tanzania vide Civil Appeal No.262 of 2019. In its Judgment dated 21st June 2022, the Court of Appeal dismissed the appeal for lack of merits. This means that the decision of this Court in Commercial Case No.132/2016 remains intact. Reading through the Judgment of this Court in Commercial case No.132/2016, it is clear that the same emanated from breach of Lease Agreement dated 22nd October 2007 between the same parties herein whereby the Applicant had leased seven (7) Scania Torino Marcopolo buses, Model F94HB4X 220 for rentals as stipulated in the lease agreement and that the agreed rental amount was USD 1,932,800. By 29th February 2016, the amount due and payable to the Applicant from the Respondent was USD 744, 416.66. The Applicant therefore has a decree in his hand which he can enforce against the Respondent by any mode allowed in law and at his convenient time subject to the law of limitation. It must be 16 noted that that decree is with respect to “a sum of USD 776,282.98 being arrears of rentals, interests and penalties.” This Application, therefore, is not an attempt to execute or enforce the decree in Commercial Case No.132/2016 but an alternative and independent remedy available to the Applicant as a Lessor under the Financial Leasing Act. As it was correctly argued by Mr. Mnyele, Learned Advocate, the remedy sought in Commercial Case No.132/2016 was with respect to non-payment of the agreed rental amounts only not a claim for the residuary value of the seven leased buses or claiming their recovery/ possession as such. By this application, the Applicant is now pursuing a separate and independent statutory remedy of repossession of the leased properties by virtue of being the Lessor hence title holder of the leased 7 buses. Mr. Kitua, Learned Advocate, advanced an argument that the seven buses sought to be repossessed in this application are not subject to the Financial Lease between the Applicant and Respondent entered into in 2007. His reason for that argument was that the Motor Vehicle Registration Cards for the seven buses attached as Annexture EADB-2 to the affidavit in support of the application, shows that the seven buses are jointly owned between the Applicant and the Respondent whereas the Financial Leasing Act provides 17 that the leased properties under that law shall remain the property of the Lessor during the period of the financial lease. I have looked at the present application and it is obvious that the same Financial Lease Agreement that gave rise to the Commercial case No.132/2016 between the parties herein is the one on the basis of which the present Application has been made. It was attached as Annexture EADB-1 to the affidavit. I have also looked at the details of the 7 buses that were the subject matter of the Commercial case No.132/2016. It is clear that the same description of the seven Motor vehicles is given in the present application. Annexture EADB-2 is made up of 7 Motor Vehicle Registration Cards each one for each of the 7 buses. I therefore do not accept the argument by Mr. Kitua, Learned Advocate, that the seven buses whose ownership cards were annexed by the Applicant in Annexure EADB 2, are of another project and not related to financial lease agreement dated 22nd October 2007 subject of this application. They are the same vehicles and it has already been judicially settled that the Respondent has breached the said lease agreement for non-payment of the agreed rentals in respect thereof. There is another angle to look at the argument raised by Mr.Kitua, Learned Advocate. Mr.Kitua argued that the seven Motor vehicles sought to 18 be repossessed cannot be repossessed under the financial lease agreement of 22nd October 2007 between the parties herein because their registration cards show that the seven vehicles are jointly owned between the Applicant and the Respondent. He reasoned that this feature defeats the spirit of the Financial Leasing Act which requires that the equipment subject to the financial lease under the Act should remain the sole property of the Lessor during the period of the lease, and not otherwise. This argument, interesting as it is, represents a misconception of “property law” in respect of financial leasing arrangement. I will explain. I have paid attention to annextures EADB 2 to the affidavit which are seven Motor Vehicle Registration Cards for the seven buses. The Motor Vehicle Registration Cards conspicuously show the details of the “owner” as “Hood Transport Co.Limited of Morogoro”. The same Cards also show the details of the “Title Holder” as “East African Development Bank of Dar es Salaam”. The argument by Mr.Kitua is that if the buses sought to be repossessed were owned in connection with the financial lease of 22nd October 2007 between the parties herein, under the provisions of section 4(4) of the Financial Leasing Act, the registration cards thereof could have contained only the names of the Applicant as the owner and not both the names of the Applicant and the Respondent as joint owners 19 thereof. Now, this argument does not hold water in law of property because being the “Title Holder” and being “the Owner” of a property do not signify or convey the same legal concept and attributes under the law of property. In a financial lease regulated by the Financial Leasing Act of Tanzania Cap 417 of the Laws of Tanzania, whereas ownership in terms of “possession and use” of the leased equipment is thereby transferred from the Financier/Lessor to the Borrower/Lessee, for the duration of the financial lease agreement, the “title” to the leased equipment is not thereby transferred as well, unless the Lessee, with the agreement of the Lessor, exercises an option to purchase the residuary value in the leased equipment after expiry of the financial lease agreement. The fact that the Lessor enjoys broader and superior rights over the leased property is seen under section 4(5) of the Financial Leasing Act which ostensibly vests the full “bundle of rights” in the title holder of the procured property that is to be leased, that is, it vests the title upon the Financier/ Lessor. It provides: 20 The supplier of a leased asset shall transfer the title to the leased asset to the lessor for purpose of delivery of such asset to the lessee for possession and use. (Underlining supplied). The above provision means that the supplier of the equipment that is financed by the Lessor for the benefit of the Lessee, shall transfer the title to the property to the Financier/Lessor and who, in turn, shall transfer ownership in terms of possession and use, to the Lessee. Hence the Lessor is the title holder and the Lessee is the Owner of the supplied equipment under a financial leasing agreement. The narrow or limited scope of the rights in the leased property that are transferred by the Financier/Lessor to the Owner/lessee, is very well captured under section 3 of the Financial Leasing Act which defines a Lessor as: “a person legally registered or licensed to engage in financial leasing business, who acting under a financial lease agreement, conveys to another person known as the lessee, for an agreed period of time, the right to possession and use an asset in 21 return for rental payments and includes its successors and assignees.” (Underlining supplied) For avoidance of doubt, under the spirit of the Financial Leasing Act, which is based on the law of property, ownership of a property signifies the right to possess and use the property. Holding title to a property, on the other hand, constitutes the legal basis of ownership, that is, the legal basis for possessing and using the property. Title to property is the aggregate of legal rights enjoyed by a person under the law and signifies all rights that can be secured and enjoyed under the law. A title holder enjoys a “bundle of rights” namely: the right of possession; the right of control; the right of exclusion; the right of enjoyment and the right of disposition. A mere owner of property ordinarily has the right to possess and use. A title holder may not actually be in possession or use of the property in question but by virtue of his title to the property, he is, in law, entitled to the use and possession of the same property whose ownership has been transferred to the owner. That is why the lessor as the title holder, in a financial lease agreement, has the right to repossession or recovery, amongst other rights. He can “repossess” the leased equipment because from the very beginning he is always entitled to possess the same subject only to the terms of the financial 22 lease agreement by which he transferred the right to possession and use thereof to the lessee/ owner. In respect of the 7 buses the subject of the Financial Lease Agreement in this application, therefore, despite the fact that the names of the Applicant Lessor and the Respondent Lessee both appear in the same Motor Vehicle Registration Cards, the Applicant as the lessor is endorsed therein as the “title holder” not the owner. The Applicant/Lessor thereby enjoys the full bundle of rights to possession, control, exclusion, enjoyment and disposition of the said seven Motor vehicles. The Respondent’s name is endorsed as the “owner” of the same vehicles and, therefore, she has only limited rights to possession and use of the vehicles. Thus, the argument by Mr. Kitua, Learned Advocate, that the 7 buses in annexture EADB 2 are jointly owned by the Applicant and the Respondent, is misconceived. There is only one registered title holder, namely the Applicant and only one registered owner, namely the Respondent. His further argument that the seven motor vehicles in annexture EADB-2 are not the subject of the Financial Lease Agreement between the Applicant and the Respondent because they are not registered as an exclusive ownership of the Lessor/Applicant, is misconceived. The argument by Mr.Mnyele, Learned Advocate, that the said Motor vehicles 23 could not be attached in execution of the decree in Commercial Case No.132/2016 since they belong to the Applicant, is sound in law since it would be inconceivable for a decree holder to attach and sell his own property with a bid to satisfy execution of a decree passed against another person. However, since the Applicant is the title holder of the seven buses, he is entitled, subject to the terms of the lease agreement and the statutory provisions, to repossess what has always been his property and which is now in the possession of the Respondent under the lease arrangement which allegedly has been breached and has expired. In a financial leasing, the Financier/Lessor retains title to the property and transfers the ownership to the Borrower/ Lessee. With the Title holder retaining superior rights than those of the Lessee/Borrower/ owner, the Financier/Lessor, as the title holder, can always exercise his rights, subject to the law and the contractual arrangement, over the leased property by taking repossession and use of the same. This is because the bundle of rights enjoyed by the title holder is broader and includes all the rights temporarily transferred to the owner under the lease agreement. On the other hand, the rights of the Lessee/Owner are temporary, narrower and derivative emanating from and subject to the financial lease agreement. 24 The Respondent relied upon annexture HTCL 1 to show that she had repaid all the agreed rental amounts. Mr. Kitua, Learned Advocate, submitted that if the Respondent will be condemned to surrender the said buses for which it has fully paid, it will be an injustice. There are two compelling reasons which militate against that argument. Firstly, is the doctrine of issue estoppel. Whether or not the agreed rentals were paid by the respondent was an issue in the Commercial Case No.132/2016 where this Court in its Judgment answered that issue in the negative by declaring the Respondent to have breached the terms of the lease for non-payment of accumulated rentals. This issue, therefore, cannot be re-opened and re-litigated upon now in this court as it is barred by the doctrine of issue estoppel. The second reason that defeats Mr. Kitua’s argument that if the Respondent will be condemned to surrender the said buses for which it has fully paid, it will be an injustice, is related to the nature of a financial lease that at the end of the lease period, the residuary value on the leased equipment shall revert to the lessor and must be handed over to the lessor unless the Lessee exercises an option to purchase the same from the lessor and with agreement of the lessor. This is regulated by section 4(7) of the Financial Leasing Act that provides: 25 “At the expiry of the period of the financial lease agreement and subject to the consent by the lessor, the lessee may exercise an option to purchase the asset at a price to be agreed upon by the parties or may return the asset to the lessor, or request renewal of the lease agreement: Provided that under a financial Lease agreement the purchase price to be agreed upon by the parties upon expiry of the lease term shall be based on the residual-value of the asset at the expiry of the Lease term.” The above provision entails that even if the argument by Mr.Kitua, Learned Advocate, had been correct, that is even if the Respondent had repaid in full all the agreed periodical rentals for the 35 months term as agreed under the lease agreement, still the Respondent Lessee would have been obliged to surrender the equipment to the Applicant Lessor. The only way out was for the Respondent to purchase the leased equipment or renew the lease agreement in respect of the leased equipment. I therefore find the argument by Mr.Kitua, Learned Advocate, with respect, a misconception of the law governing financial leasing. The Supreme Court of India in the case of Asea Brown Boveri Ltd vs Industrial 26 Finance Corporation of India, (2005) AIR, Supreme Court 17, in explaining further about a financial lease held: “In our opinion, financial lease is a transaction current in the commercial world, the primary purpose whereof is the financing of the purchase by the financier. The purchase of assets or equipment’s or machinery is by the borrower. For all practical purposes, the borrower becomes the owner of the property in as much as it is the borrower who chooses the property to be purchased, takes delivery, enjoys the use and occupation of the property, bears the wear and tear, maintains and operates the machinery/equipment, undertakes indemnity and agrees to bear the risk of loss or damage, if any. He is the one who gets the property insured. He remains liable for payment of taxes and other charges and indemnity. He cannot recover from the lessor, any of the above mentioned expenses. The period of lease extends over and covers the entire life of the property for which it may remain useful divided either into one term or divided into two terms with clause for renewal. In either case, the lease is non-cancellable.” 27 In an attempt to further reveal the true nature of a financial lease, I make reference to the scholarly work entitled Lease Financing & Hire Purchase, by Vinod Kothari (Second Edition, 1986, at pp. 6 & 7), wherein the author has quoted T.M. Clark, one of the most authentic writers on the subject who defines a financial lease and operating lease in the undergoing words:- “A financial lease is a contract involving payment over an obligatory period of specified sums sufficient in total to amortise the capital outlay of the lessor and give some profit. An operating lease is any other type of lease that is to say, where the asset is not wholly amortised during the non-cancellable period, if any, of the lease and where the lessor does not rely for his profit on the rentals in the non- cancellable period. The features of the financial lease are as under: 1. The asset is use-specific and is selected for the lessee specifically. Usually, the lessee is allowed to select it himself.” 2. The risks and rewards incident to ownership are passed on to the lessee. The lessor only remains the legal owner of the asset. 28 3. Therefore, the lessee bears the risk of obsolescence. 4. The lessor is interested in his rentals and not in the asset. He must get his principal back along with interest. Therefore, the lease is non- cancellable by either party. 5. The lease period usually coincides with the economic life of the asset and may be broken into primary and secondary period. 6. The lessor enters into the transaction only as a financier. He does not bear the costs of repairs, maintenance or operation. 7. The lessor is typically a financial institution and cannot render specialized service in connection with the asset. 8. The lease is usually full-pay-out, that is, the single lease repays the cost of the asset together with the interest." The respondent in this case is the borrower under the Financial Lease with the Applicant dated 22nd October 2007 and as such, the purchase of the seven busses was done by the borrower and, for all practical purposes, the borrower became the owner of the property in as much as it is the borrower who chose the vehicles to be purchased, took delivery, enjoyed the use and 29 occupation of the vehicles, did bear the wear and tear, maintained and operated the vehicles, undertook indemnity and agreed to bear the risk of loss or damage, if any. The title to property, however, vests with the title holder who is the financier or lessor who enjoys the right of possession; the right of control; the right of exclusion; the right of enjoyment and the right of disposition. Now, my attention is turned to the gist of the application itself. The present application is one that is seeking re-possession of the seven leased motor vehicles by the title holder/ Lessor. The question is whether or not the Applicant/Lessor is entitled to take repossession of the said seven Motor vehicles from the Lessee/Owner? The application, according to the Chamber Summons, is premised under sections 12(7), 13 (2) (b), and 13 (4) (b) of the Financial Leasing Act CAP 417. I will reproduce them all for ease of reference. Section 12(7) provides that: (7) Subject to subsection (4) of this section, the lessee shall, at the expiration of the financial lease agreement, return the asset to the lessor, unless the lease is further renewed with the consent of the lessor or the lessor agrees to its purchase by the lessee. 30 Section 13 (2) (b), provides that: “In the event of expiry of the financial lease agreement the lessor shall have a right to repossess the leased assets which shall not be included in the assets of any receivership or pool of assets to be disposed of by the creditors of the lessee.” Section 13 (4) (b) provides that: “Where the lessor becomes entitled to repossess the asset leased through breach of agreement by the lessee or otherwise through operation of law, and the lessee does not deliver the asset after having been given due notice to surrender the asset to the lessor, the lessor may apply for an order for repossession or recovery of the leased asset in a Court.” Deduced from the above reproduced provisions of the Financial Leasing Act, the legal pre-requisites to be met by the Financier/Lessor seeking to take repossession of the leased equipment from the Owner/Lessee, are namely that: 31 (a) The lessor must be entitled to repossession of the leased equipment. This entitlement may be due to expiration of the financial lease agreement, breach of agreement by the lessee or otherwise through operation of law; (b) The equipment leased should not have been purchased by the lessee; (c) The lessee must have been given due notice to surrender the asset to the lessor; (d) The lessee should have failed or refused to deliver the asset after having been given due notice to surrender the asset to the lessor; Where the above legal requirements exist in a particular financial lease agreement, the law grants the lessor the entitlement to repossess the leased equipment. The lessor may exercise the right to repossession either on his own motion without having recourse to court but without committing a breach of peace. Alternatively, the lessor may do seek to repossess through an application for an order of the court for repossession or recovery of the leased asset. In the application at hand, the Lessor has decided to pursue the later avenue, hence this application seeking repossession order against the respondent for the said seven motor vehicles. 32 The first question to be resolved in the gist of the application at hand is whether the lessor is entitled to repossession due to expiration of the financial lease agreement, breach of agreement by the lessee or otherwise through operation of law? From the facts of the case at hand the Applicant has alleged that there has been breach of agreement by the lessee as evidenced by the Judgment and Decree in the Commercial Case No.132/2016 wherein the Respondent was found in breach of the terms of the lease agreement by failing to pay the agreed rental amounts. The Respondent attached annexture HTCL 1 as proof of payment of all the agreed rental amounts. It is a Statement of the Account of the Respondent with the Applicant from 2008 to 2016. It must be know that the Judgment and Decree in the Commercial Case No.132/2016 were issued on 22nd May 2019 and that one of the issues specifically framed and answered in the said the Commercial Case No.132/2016 was “whether there was a breach of the lease agreement by the defendant?” To this issue, the Court answered in the affirmative. An appeal to the Court of Appeal failed. Therefore, it is a judicially settled position that the Respondent has breached the lease agreement dated 22nd October 2007 for non-payment of the agreed rental amounts to the Applicant. In addition, the duration of the lease agreement 33 according to Clause 2.0 thereof as evidenced in Annexture EADB-1, was 36 months from 22nd October 2007. This means that the term of the financial lease dated 22nd October 2007 between the Applicant and the Respondent has long expired since 2010. At this juncture, I take note of the fact that this application is not only based on expiration of the term of the lease agreement but also on breach of payment of rentals which ground was a subject of court litigation until 21st June 2022 when the Court of Appeal of Tanzania pronounced its decision in Civil Appeal No.262 of 2019. The other legal requirement to be proved by the Applicant is that the equipment leased should not have been purchased by the lessee. This requirement, apart from being statutory, it is contractual as well. Clause 22.0 of the Financial Lease Agreement entered by the Applicant and the Respondent herein as the Lessor and the Lessee, respectively, stipulated that: “If the Lessee (having meanwhile duly observed all the terms and conditions of the Agreement whether express or implied) shall be desirous of purchasing the Equipment, it shall be at liberty to do so either at any time during the period of the lease after prepaying the rentals or at the expiration of the 34 period of the lease. In either event the Lessee shall in addition pay the Lessor a purchase price representing 1.0% of the Lease amount. The Lessor shall cause to be done and do all such things as may be necessary to transfer the Title of the Equipment from the Lessor to the Lessee.” The facts obtaining in this case show that after the agreed 36 months of the life span of the Lease Agreement, the Respondent was still indebted to the Applicant as they had defaulted to pay rentals and had never exercised an option to purchase as per the correspondences between the Applicant and the Respondent in annexture EADB-3. The Respondent through the counter affidavit merely maintained that it had never defaulted to pay the agreed lease rental amounts as all the rentals were paid in full. There was not even an allusion to the possibility of the Respondent having purchased the leased motor vehicles. I therefore find it as a fact that the equipment leased were not purchased by the lessee. The other requirements which I will consider together are that the lessee should have been given notice to surrender the leased equipment and he should have not delivered the asset after having been given the due notice to surrender the asset to the lessor. I asked myself as to whether the 35 Applicant as the lessor, had ever given notice to the Respondent as the lessee, for the Respondent to surrender the leased motor vehicles to the Applicant? Annexture EADB-8 to the affidavit in support of the application is a letter written by the Applicant’s Advocates “Mnyele, Msengezi& Co. Advocates to the Directors of Hood Limited dated 7th February 2023. The letter after giving details of the 7 buses demanded, inter alia, that: “You defaulted in servicing the lease agreement thus entitling the Bank to possess and dispose the buses as they may deem it fit. We have been instructed to demand from you for disclosure of the place and location where the buses are situated and to return the equipment to the Bank at its offices in Dar es Salaam.” With the undisputed annexture EADB-8 to the Counter Affidavit in place, I am justified to make a finding that Applicant as the lessor had given notice to the Respondent as the lessee, for the Respondent to surrender the leased motor vehicles to the Applicant but that the Respondent failed, refused or neglected to do so. It follows therefore that all the necessary legal requirements for the Lessor of a financial lease to repossess the leased equipment from the lessee 36 do exist in this application. Like I have said above, there are two main ways by which the Lessor may take repossession of the leased equipment from the Lessee. The lessor may take possession of the leased equipment on his own motion but after making sure that such a move does not lead to committing a breach of peace. Alternatively, the lessor may take possession of the leased equipment through an application for an order for repossession or recovery of the leased asset in a court. The Applicant Lessor herein has opted for the later option hence the present application. Since all the legal requirements have been met, I am inclined to grant the application as prayed by Mr. Mnyele, Learned Advocate. Before I pen-off, I should say, once again, that the present application is not a duplication or execution application in disguise in respect of the Decree in Commercial Case No.132/2016. As it can be seen from the nature of the proceedings and the prayers and remedies sought in Commercial Case No.132/2016, the same was an ordinary civil suit, not an application under the Financial Leasing Act. The remedies therein sought were: 37 “a) Payment of USD 776,282.98. (b) Interest on (a) above at the rate agreed in terms of the lease agreement from the date of filing of the suit to the date of judgment and thereafter interest on the decretal amount to the date of final settlement of the decree. (c) General damages as may be assessed. (d)Costs of the suit, and (e) Any other reliefs this Honourable Court may deem it fit to grant.” There was no prayer in Commercial Case No132/2016 seeking repossession of the leased assets which is the mainstay of the present application. In other words, through the Commercial Case No. 132/2016, the Applicant, as the Plaintiff therein, was exercising the “other remedies” apart from taking possession of the leased assets. This is allowed under the provisions of section 13(5) of the Financial Leasing Act which provides: 13(5) The right of the lessor to repossess shall not prejudice other remedies available to the lessor under any other law, including but not limited to, the right to recover damages for loss caused by non- 38 compliance with the terms of the financial lease agreement by the lessee. (Underlining supplied) This means that the Applicant, as the Financier/Lessor in the Financial Lease, had a variety or remedies under the Financial Leasing Act and other remedies under any other law. The Applicant started with seeking remedies provided for by other laws through filing of the Commercial Case No.132/ 2016 and obtained a decree in his favour. As the remedies sought in the Commercial Case No.132/2016 and in this Application did not and do not overlap, I find that the present Application is appropriately made. There is no finding of fact or law in Commercial Cased No.132/2016 which could have affected the present application. This Application could have, and actually has, been preferred independently of the other remedies under the other laws. I therefore grant the application at hand and order that: (a) The Applicant is hereby allowed to take possession/recovery from the Respondent, of the following leased equipment which are in possession of the respondent namely: (i) Scania Bus with Registration Number No.T746 AVL, Model No.F94 with Chassis No. 9BSF4X20003621853; 39 (ii) Scania Bus with Registration Number No. T773 AVL, Model No. F94 with Chassis No. 9BSF4X20003622398; (iii) Scania Bus with Registration Number No. T779 AVL Model No. F94 with Chassis No. 9BSF4X20003621837; (iv) Scania Bus with Registration Number No. T751 AVL Model No. F94 with Chassis No. 9BSF4X20003622416; (v) Scania Bus with Registration Number No. T781AVL Model No. F94 with Chassis No. 9BSF4X20003622408; (vi) Scania Bus with Registration Number No. T T 405 AHB Model No. F94 with Chassis No. 9BSF4X20003555793; (vii) Scania Bus with Registration Number No. T501 AHB Model No. F94 with Chassis No. 9BSF4X20003558591. (b) The respondent’s Directors are hereby ordered to indicate and show to the Applicant or any person acting under his instructions, the location of the seven motor vehicles referred to in (a) above for the purposes of repossession by the Applicant. 40 (c) The respondent shall bear the costs of this Application. It is so ordered. A. H. GONZI JUDGE 14/02/2025 Ruling is delivered in Court this 14th day of February 2025 in the presence of Mr. David Ndimu, Advocate for the Applicant and in absence of the Respondent who was duly notified of the date of the Ruling. A. H. GONZI JUDGE 14/02/2025 41