EQUITY BANK T VS DAR LUX CO

1 IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA COMMERCIAL DIVISION AT DAR ES SALAAM COMMERCIAL CASE NO. 02 OF 2023 EQUITY BANK TANZANIA LIMITED ……………………………. PLAINTIFF VERSUS DAR LUX COMPANY LIMITED …………………………………… 1ST DEFENDANT SIMAGUNGA GENERAL TRADING CO LIMITED……………… 2ND DEFENDANT DONALD XAVERY SIMAGUNGA…………………………………… 3RD DEFENDANT PENDO DONALD XAVERY…………………………………………… 4TH DEFENDANT JUDGMENT July 10th, 2024 & August 30th,2024 Morris, J This is an ex parte judgment against the four defendants above. They all failed to enter appearance for the mediation session. In consequence thereof, their defence was struck out and the plaintiff proceeded to prove his case without their presence. The order of the Court dated June 20th, 2024 in such regard was pursuant to rule 36(a) of the High Court (Commercial Division) Procedure Rules, 2012 (the Rules). 2 The plaintiff instituted the present suit praying for the judgment and decree of the Court against the defendants for various reliefs: a declaration that the defendants are in breach of the loan facility agreements; the order for payment of the outstanding amount of TZS 20,981,468,221.12; payment of interest at 18% per annum charged monthly and accruing from the date of the first default to the date of judgment; payment of default interest at an agreed rate of 6% per annum in addition to interest described above on the outstanding amount from the date of the default to the date of judgment; payment of general damages; and costs and expenses for recovery of the debt. Further, the plaintiff prayed for the order for attachment and sale of the first and second defendants’ property mortgaged in favour of the plaintiff to secure the repayment of the first defendant’s outstanding loan amount; the order for enforcement of the securities and guarantees provided by each defendants in favour of the plaintiff per the terms of security documents; payment of interest on the decretal sum at the Court’s rate from the date of judgment till full satisfaction of the entire decretal sum; payment of costs of this suit and, any other relief(s) the Court may deem fit to grant. 3 The apposite facts of this suit as discerned from the pleadings are not difficult to account. Through several facility letters of diverse dates, the plaintiff granted the first defendant respective loans. To wit, on 20th December, 2016 the first defendant received the 1st loan from the plaintiff to the tune of TZS 1,200,000,000.00 The money was for acquisition of buses from the second defendant (the first defendant’s sister company). Subsequently, other loans from the plaintiff in favour of the first defendant followed. Specifically, it is alleged in the plaint (paragraph 6) that, the corresponding facility letters for the subsequent disbursements are dated 29th November, 2017; 13th September, 2018; and 29th June, 2019. The loan amounts by the plaintiff to the first defendant were USD 2,570,400.00 for importation of fourteen (14) Marcopolo Bus Bodies Model X1200; USD 1,610,400.00 for converting Letter of Credit Facility to Term Loan; TZS 2,500,000,000.00 as capital for payment of import duties; and TZS 10,942,487,074.00 for converting 4PIL to Term Loan Facility and for purchasing bulk stock fuel, spare parts, tyres as well as construction of warehouse. Finally, the first defendant received another loan from the plaintiff worth TZS 742,068,960.00. This loan was granted to the former 4 through a facility letter dated 11th September, 2019. The money was for payment of insurance premium by the first defendant. The plaintiff’s further allegations were to the scope that, the stated facilities were secured. The securities included, the first defendant’s specific debenture dated 26th September, 2018; mortgage dated 1st July, 2019 in respect of landed properties located in Bagamoyo and Chalinze Districts with Customary Titles Nos. 16BGM/3218, 16BGM/3219 and 16BGM/3148. Another security was the second defendant’s Corporate Guarantee dated 26th September, 2018 which was amended on 1st July, 2019. In addition, the third defendant executed mortgages in respect of Plot No. 50 Block E-Part I, Ilala Municipality and Plot No. 2094 Block “D” Kinondoni Municipality on 29th December, 2016 and 16th December, 2017 respectively. Moreover, the third defendant’s offer of right of occupancy over Plot No. 558 Mbezi-Dar es Salaam registered in the names of Faustina Sagatwa; and the third and fourth defendants’ personal guarantees dated 1st July, 2019 secured the first defendant’s loans herein. Further averments were that, on 6th November, 2019 the plaintiff acting upon the first defendant’s request; extended all loan facilities’ tenor 5 for a term of 30 days each. Such extension was effectuated by a letter dated 26th November, 2019. Subsequently, the plaintiff again acting upon the first defendant’s application, offered the latter with a temporary overdraft facility of TZS 300,000,000.00 which was duly accepted by the first defendant as the working capital. It was the plaintiff’s additional assertion that by a facility letter dated 11th November, 2021 the bank sanctioned restructuring of the first defendant’s loans thereby consolidating all IPF facilities to a business loan facility of TZS 16,007,254,337.10 together with all accruals. The objective of this step was to match the first defendant’s cashflows. Nevertheless, the first defendant failed to repay the facilities. As such, at the time of instituting the present suit, the total outstanding amount allegedly stood at TZS 20,981,468,221.12. According to the plaintiff, the first defendant was issued with a demand notice dated 26th October, 2022 for payment of the outstanding amount stated above but he failed to heed compliance. He as well failed to repay the outstanding amount. That, following the first defendant’s failure to heed the 6 demand, the second, third and fourth defendants being his guarantors, were likewise served with demand notices respectively to no avail. Thus, it is the plaintiff’s assertion that the first defendant is in breach of the terms and conditions of the facilities. To the plaintiff, the alleged breach has occasioned losses on its part, viz., loss of the entire outstanding sum under the facility letters; failure to invest and utilise the outstanding amount in business endeavours; seeking alternative finances to meet daily financial and contractual obligations; and expenses in seeking recovery of the outstanding amount. Out of the pleadings, the Court framed three (3) issues for determination, which are; 1. Whether the first defendant breached the loan facility agreement between him and the plaintiff. 2. If the first issue is in the affirmative, whether the plaintiff suffered loss. 3. To what reliefs are the parties entitled. To prove his claims herein, the plaintiff was represented by Messrs. Elly Mkwawa and Gilbert Masaga, learned counsel. Further, only one witness 7 - Ibrahim Mavika, testified for the plaintiff. His witness statement was adopted by the Court as his evidence in chief under the Rules. He then tendered fifteen (15) exhibits. These are, the Loan Facility Agreement between Equity Bank and Dar Lux dated 25.05.2017 for TZS 1.2 billion (P1); the Loan Agreement dated 29.11.2017 for USD 2,570,400.00 and USD 1,610,400.00 (P2); the Loan Facility Agreement dated 11.09.2019 for consolidation of previous agreements and for the loan of TZS 10,942,487,074 (P3); the Loan Facility Agreement dated 26.11.2019 for extension of Tenor of Existing Loan Facilities (P4); the Facility Letter of 28.03.2020 for TZS 300,000,000 (P5); the Facility Letter of 11.11.2021 for TZS 16,007,254,337.10 and the Police Loss Report dated 09.07.2024 (P6); the Account Statements of Dar Lux’ loan from 15.07.2020 to 20.10.2020 and from 22.01.2021 to 20.10.2022 (P7); 24 Vehicles Registration Cards (P8); the Mortgage Deeds of 28.12.2016 and 28.09.2018 (P9); the Mortgage Deeds dated 16.12.2017 (P10); the Corporate Guarantee of Simagunga General Trading Co. Ltd of 01.07.2019 (P11); the Personal Guarantee from Directors of Dar Lux Co. Ltd dated 01.07.2019 (P12); 7 Mortgage Charges documents on Primary Mineral Licences dated 2.4.2022 (P13); the 8 Debenture of 26.09.2018 (P14); and the Legal Charges from Dar Lux Co. Ltd on 3 landed properties (mortgages) dated 01.07.2019 (P15). Apparently, PW1’s testimony greatly reiterated what is stated in the plaint. He recapped the loan facilities from the plaintiff to the first defendant on diverse dates. He also affirmed that the securities stipulated above were duly registered by the plaintiff. Furthermore, he testified that, between 2016 and 2021 the first defendant applied for several banking facilities from the plaintiff. After fulfilling the loans requisites, the money was disbursed in favour of the latter. It was testified further that, despite having received and made use of all the facilities; the first defendant did not fulfill his obligation to repay them. According to PW1, as of 20th October 2022, the outstanding balance was TZS 18,976,302,374.76 which amount continues to rise due to interest charges. Regarding the outstanding amount, PW1 made reference to Bank Statements (P7). Hence, according to PW1, the defendants jointly breached their obligations under the banking facilities. As such, it was PW1’s further testimony that, the plaintiff has suffered and continues to suffer losses and damages as particularised under paragraphs 17.1 to 17.4 of the plaint. 9 I now turn to determine the framed issues. The first one is with regard to whether the first defendant breached the loan facility agreement between him and the plaintiff. Grounding this issue is the uncontroverted testimony of PW1. He was express that, the first defendant failed to fulfill his obligations of repaying the disbursements under facilities made to him by the plaintiff. It was specifically stated by PW1 that, as of 20th October 2022 the outstanding balance was TZS 18,976,302,374.76. In support hereof was the Account Statement of the first defendant for a period from 15.07.2020 to 20.10.2022 (P7). Special damages, in law, call for express pleadings and specific proof. The plaintiff has discharged this duty perfectly. As such, the first issue is answered in the affirmative. The second issue seeks to ascertain whether the plaintiff suffered loss. According to PW1, the plaintiff has incurred losses due to the defendants’ failure to repay the outstanding amount. Paragraphs 17.1 to 17.4 of the plaint are categorical in this regard. The said paragraphs have revealed the following losses: loss of the entire outstanding sum; failure to utilise the outstanding amount in business endeavours; daily operational needs, costs and expenses in seeking recovery of the outstanding amount 10 and general damages. Regarding the 1st item as to loss of the outstanding sum, this court is satisfied that indeed the plaintiff claims the outstanding sum as already discussed in the first issue above. Nonetheless, there is no evidence on record to prove daily operational expenses of the plaintiff in connection with the defendant’s outstanding amount. The plaintiff has not produced any receipt of bill paid or contractual obligations settled by him in connection to the loan facilities herein. Likewise, there is no evidence on record as to how the plaintiff has failed to utilise the outstanding amount in investment. Also, there is no evidence as to costs of pursuing the outstanding amount. Therefore, this issue is partly answered in the affirmative to the extent stipulated above. The third issue is in connection with the parties’ reliefs. As per the plaint, the plaintiff’s prayed for the following reliefs: i. A declaration that the defendants are in breach of all the undertakings entered and executed in favour of the plaintiff under the terms and conditions contained in the facility letters and their respective Security Documents; 11 ii. payment of the total outstanding amount of TZS 20,981,468,221.12. iii. payment of interest computed at an agreed rate of 18% per annum charged monthly and accruing from the date of the first default to the date of judgment. iv. payment of default interest at an agreed rate of 6% per annum in addition to interest described above computed on the entire outstanding amount charged monthly and accruing daily from the date of the default to repay any of the Outstanding Amount due to the date of judgment. v. payment of general damages, costs and expenses, including legal fees, incurred by the plaintiff as a result of the Defendant’s failure to heed to the terms and conditions of the Facility Agreements and the Security Documents, and other resultant costs and expenditure incurred by the Plaintiff in consequence of the Defendants’ failures committed in breach of the terms of the facility letters and the Security Documents. 12 vi. attachment and sale of the 1st and 2nd Defendants’ property mortgaged in favour of the plaintiff to secure the repayment of the 1st Defendant’s Outstanding Amount under the terms and conditions of their respective facility letters, and for an order for enforcement of the securities and guarantees provided by each of the 1st to 4th Defendants in favour of the Plaintiff as per the terms of each relevant parties’ Security Document. vii. payment of interest on the decretal sum at Court’s rate from the date of judgment till full satisfaction of the entire decretal sum. viii. payment of costs of this suit and, any other relief(s) the Court may deem fit to grant. In terms of relief number 1, the plaintiff has managed to prove that the defendants, particularly the first defendant has breached his obligations by failure to repay the outstanding amount. As to relief number 2, the plaintiff has partly succeeded to prove the outstanding amount from TZS 20,981,468,221.12 to TZS 18,939,022,800.75/= as per exhibit P7. In law, for the plaintiff to be granted specific damages, he must discharge two duties 13 satisfactorily. That is, he must specifically plead and prove them. See, for example, Bamprass Star Service Station Ltd v Mrs. Fatuma Mwale [2002] TLR 390; Zuberi Augustino v Anicet Mugabe [1992] T.L.R 137; Stanbic Bank Tanzania Ltd v Abercrombie & Kent (T) Ltd, CoA Civil Appeal No. 21 of 2001 (unreported) that special damages require strict proof. Regarding reliefs number 3 and 4, there is no specific proof to that effect. To wit, PW1 has not testified on that aspect to the required standard of law. Primarily, it is the dictates of law that claims for interest must be pleaded, particularised and proved for them to pass. Nevertheless, the Court is heedful of the principles laid down in Yara Tanzania Limited v Ikuwo General Enterprises Limited, Civil Appeal No.309 of 2019; and Amani Safari Adventure Limited v Petrofuel (T) Limited, Civil Appeal No. 67 of 2023 (both unreported) that: on the basis of mercantile practices, interest may be granted to the winning litigant even where he has not proved it specifically. On that basis and in line with circumstances of this case, the plaintiff is granted 10% interest on the amount above counting from the day of default to the date of this judgment. 14 Likewise, reliefs under number 5 were not specifically proved save for elements pointing to grounds of general damages. As to relief number 6, the same is not maintainable at this stage save for executing court. Intriguingly, the plaintiff presented this prayer for the Court’s order of attachment and sale of the mortgaged property or other defendant’s assets for recovery of the decretal sum. With respect, I am chary not to grant this prayer. I will pen my reasons here. One, parties did not litigate on mortgage transaction and allied parties’ rights and obligations. That is, apart from admitting the mortgage deeds in evidence, the Court did not adjudicate on the scope of the mortgages. As an example, the parties did not prove existence or otherwise of other incumbrances to the mortgage property such as second or third mortgages. Two, the contractual obligations in the mortgage differ from those in the Facility. Three, the presented prayer is a technical infusion of the post- judgment/decree execution proceedings in this matter. The way the prayer is presented grips it all. Obviously, the gist of such prayer fits well in the ambits of the executing court. In terms of reliefs number 7 and 8, the same is at the discretion of the court. As such the plaintiff is not duty-bound to 15 prove the same. Therefore, for the foregoing reasons and analysis, this suit partly succeeds. For avoidance of doubts, the defendants are hereby held being in breach of the facility letters with the plaintiff. The defendants are jointly ordered to pay the plaintiff outstanding sum of TZS 18,939,022,800.75. The defendants shall also pay the plaintiff interest of 10% on the amount above counting from the day of default to the date of this judgment; and on the decretal sum above at the rate of 7% from the date of this judgment until full payment. Likewise, the defendants are hereby ordered to pay the plaintiff general damages to the tune of TZS 10,000,000/=. Costs of this suit are upon the defendants as well. It is so ordered. The right of appeal is explained to parties. C.K.K. Morris Judge August 30th, 2024 16 Judgement delivered this 30th day of August 2024 in the presence of Advocate Elly Mkwawa for the plaintiffs and Mr. George Namwambe, the first defendant’s Human Resources Manager. C.K.K. Morris Judge August 30th, 2024