CIVIL APPEAL NO 193 OF 2023 EXIM BANK TANZANIA LIMITED VS THE M FIVE B HOTEL TOURS LTD 2 OTHER

IN THE COURT OF APPEAL OF TANZANIA AT PAR ES SALAAM fCORAM: MKUYE. J.A.. MWAMPASHI, 3.A. And MURUKE, 3. A.) CIVIL APPEAL NO. 193 OF 2023 EXIM BANK TANZANIA LIM ITED...................... ............................APPELLANT VERSUS THE M & FIVE B. HOTEL & TOURS L T D ................................1st RESPONDENT BAKHITA MATHIAS MANGA (The Administratrix of the Estate of the Late MATHIAS MANGA)......................2nd RESPONDENT BELINDA MATHIAS M ANGA................................................ 3 rd RESPONDENT [Appeal from the Judgment and Decree of the High Court of Tanzania (Commercial Division) at Dar es Salaam) (Maqoiqa, J.) dated 10th day of June, 2022 in Commercial Case No. 109 of 2016 JUDGMENT OF THE COURT 9th May 8131st July, 2024 MWAMPASHI, J.A.: This appeal arises from the decision of the High Court, Commercial Division, at Dar es Salaam (the High Court) in which the appellant's suit in Commercial Case No. 109 of 2016 against the respondents was dismissed with costs on 10.06.2023. Basically, the appellant's suit before the High Court was for a declaration that, the respondents were in breach of a Term Loan Facility Agreement, contract of guarantee and i indemnity (the Term Loan Facility) and for payment of USD. 2,878,100.00 being the outstanding amount as of 30.07.2016. In its judgment, the High Court did not only dismiss the appellant's suit with costs as alluded to above, but it also declared the whole transaction relating to the Term Loan Facility between the parties, void. Briefly, the material facts of the case from which the appeal arises, are as follows: On 11.07.2012, by the Term Loan Facility (Exhibit P2) a loan of USD 3,000,000.00 was advanced by the appellant to the 1st respondent. The Term Loan Facility was followed by the Credit Facility Agreement (Exhibit P6 b) dated 12.07.2012 under which other covenants and conditions relevant to the Term Loan Facility were stipulated. The purpose of the loan was for the completion of the ongoing constructions of the 1st respondent's Five Star Hotel in Arusha and also for beefing up the 1st respondent's working capital. According to the Term loan facility, the loan amount was payable within 36 months and it was secured by several collaterals including personal guarantees and indemnity executed by the 2nd and 3rd respondents. As the respondents allegedly failed to discharge their respective duties and obligations in accordance with the terms and conditions of the Term Loan Facility, the appellant sued the respondents for: (i) A declaration that the defendants/respondents are in breach o f the Term Loan Facility Agreem ent and the contract o f guarantees and indem nity by their failure to discharge their duties and obligations in accordance with the agreements. (ii) That the defendants/respondents jo in tly and severally to im m ediately pay the plaintiff/appellant the outstanding amount o f USD. 2,878,100.00. (iii) That the defendants/respondents jo in tly and severally to pay the plaintiff/appellant the default rate o f interest o f 14.5% charged from the date o f breach o f the term s and conditions o f the Term Loan Facility Agreem ent to the date o f fu ll paym ent o f the outstanding amount. (iv) That the defendants/respondents jo in tly and severally to pay the plaintiff/appellant interest from the date due to the date o f judgm ent thereof a t the prevailing com m ercial rate. (v) That the defendants/respondents jo in tly and severally to pay the plaintiff/appellant interest on the decretal amount from the date o f the judgm ent to the date o f fu ll paym ent thereof a t the prevailing court rates. (vi)That the defendants/respondents jo in tly and severally to pay the plaintiff/appellant general damages to cover the loss the plaintiff/appellant suffered fo r the defendants'/respondents' failure to discharge their obligations under the said contracts. According to the respondents' joint written statement of defence, the existence of the Term Loan Facility and the fact that the loan had not been repaid in full, was not denied by the respondents. However, the respondents denied that they were in breach of the said Term Loan Facility. A close examination of the written statement of defence as a whole, reveals that the crux of the respondents7defence was that it was not them who were in breach of the Term Loan Facility, but the appellant. It was further stated that the appellant was the one who had breached the Term Loan Facility first, not only by negligently and recklessly managing the 1st respondent's loan account but also by allowing fraudulent withdrawals from the said account and by making payments to unknown and even to non-existing persons without the 1st respondent's authorization. The respondents particularly stated in paragraph 2.1 of their written statement of defence that: "None o f the defendants, jointly, nor any o f the defendants severally breached the term s and conditions o f the Term Loan Facility agreem ent and contract o f guarantee and indem nity as the P la in tiff avers in paragraph 4 o f the Plaint or a t ad. The Defendants, and in particular the 1st Defendant state that, th e ir p u rp o rte d fa ilu re to d isch a rg e th e ir re sp e c tiv e o b lig a tio n s u n d e r th e te rm s o f th e Term Lo a n F a c ility a g re e m e n t a n d th e c o n tra c t o f g u a ra n te e a n d in d e m n ity w a s o cca sio n e d b y th e P la in tiff's n e g lig e n ce in m a n a g in g th e o p e ra tio n s o f th e lo a n a cc o u n t h e ld a n d o p e ra te d b y th e 1st D e fe n d a n t in th e P la in tiff's b a n k as sh all be averred hereunder. The P la in tiff sh all be put to strict proof", Again, in paragraph 4.3 of the written statement of defence, it was stated by the respondents that: "During the period o f disbursem ent o f the loan facility, the p la in tiff grossly and recklessly mismanaged the 1st defendant's loan account whereby an amount o f more than US$ 1,435,757.25 (th e "A m o u n t of th e u n a u th o rize d w ith d ra w a ls ") o f the term s loan facility were fraudulently and or wrongly withdrawn from the 1st Defendants account without the 1st Defendant's instructions or mandate and paid to third parties for no consideration a t all. The particulars o f the Plain tiff's gross negligence and want o f care in managing the operations o f the 1st Defendant's loan account contrary to the terms o f the agreem ent contained in O ffer Letter are given hereunder" We think it is worth noting, at this juncture, that after raising the defence that the respondents' failure to service the loan was occasioned by the appellant's breach of the Term Loan Facility by negligently and fraudulently managing the 1st respondent's loan account and while the matter was still pending before the High Court, the 1st respondent did on 22.06.2017 institute, in the High Court, Commercial Case No 104 of 2017 against the appellant, claiming for, among other reliefs: One, that forensic audit be conducted in the 1st respondent's current and loan accounts held and operated at the appellant's bank in order to determine the actual amounts of fraudulent withdrawals made in the 1st respondent's loan and current accounts and determine the appellant's role played in the fraudulent transaction; Two, payment of damages for conversion; Three, payment of entire sum of unauthorized withdrawals and the entire proceeds fraudulently and negligently withdrawn and drawn down from the 1st respondent's accounts or alternatively for payment of the entire sum of amounts of unauthorized withdrawals as money had and received by the appellant to the 1st respondent's use; 6 Four, payment by the appellant to the 1st respondent of the sum of the USD. 12,000,000.00 being special damages suffered by the 1st respondent caused by the appellant's negligence, fraudulent conversion and breach of contract; and Five, payment of USD. 15,000,000.00 being general and punitive damages for negligence, fraudulent conversion and breach of contract caused by the appellant's negligent and fraudulent actions and omissions. Another relevant fact noteworthy is that, apart from the High Court Commercial Case No. 104 of 2017, at the instance of the respondents and based on the same allegations that the 1st respondent's bank accounts had been negligently and fraudulently managed by the appellant, one of the 1st respondent's staff jointly with a number of the appellant's staff were charged in Criminal Case No. 242 of 2016 in the Resident Magistrates' Court of Arusha. Back to the business of the day, based on the pleadings and particularly from the nature of the defence raised by the respondents, that it was the appellant who had breached the Term Laon Facility first, and not the respondents, as stated above, the High Court, rightly so, to our view, framed the following issues: 7 1. W hether either o f the parties breached term s o f the ioan faciiity agreem ent and contract o f guarantee and indem nity by faiiing to discharge their duties and obligations under those agreements. 2. I f issue No. 1 is answered in the affirm ative, what is the outstanding amount o f the p ia in tiffis entitled to claim, if any? 3. To what reliefs parties are entitled to? In resolving the first issue, which basically was of two limbs, that is, whether it was the appellant or the respondents who were in breach of the Term Loan Facility, the High Court opted to begin with the issue on whether it was the appellant who was in breach, that is, whether the appellant negligently and fraudulently managed the 1st respondent's bank accounts and allowed unauthorized withdrawals from the said accounts. On this issue, the High Court found that it was the appellant who had breached the Term Loan Facility by faiiing to discharge its duties and obligations under the agreement. It was further found that, the appellant had been negligent and it had fraudulently allowed withdrawals of the 1st respondent's money and payment to third parties and non-existing persons. Having found so and without further ado, that is, without going into the determination of the second limb of the issue on whether the respondents were also in breach of the Loan Facility or 8 not, the High Court went on to hold that the negligence by the appellant and her fraudulent allowance for the unauthorised withdrawals did not only amount to the breach of the Term Loan Facility but it also rendered the whole Term Loan Facility void. The appellant's suit was thus dismissed with costs hence, the instant appeal which is predicated upon the following 22 grounds of appeal: 1. The successor Judges erred in law by failing to com ply with the m andatory requirem ent o f assigning reasons for taking over the conduct o f proceedings on two different occasions contrary to Order X V III rule 10 o f the C ivil Procedure Code, Cap 33 R.E. 2019 as interpreted by numerous decisions o f the Court o f Appeal o f Tanzania. 2. In the alternative and without prejudice to ground 1, the learned tria l Judge erred in law by turning the P la in tiff case for recovery o f outstanding ioan amount into a case fo r breach o f a banker custom er relationship and o r management and operation o f the 1st Respondent's account raised by the 1st Respondent To that effect, the learned tria l Judge determ ined a new case raised by way o f a written statem ent o f defence without according the P la in tiff a fu ll right to be heard. 3. In the alternative and without prejudice to ground 2, the learned tria l Judge erred in law by, suo mottu, fram ing new issues in the course o f composing judgm ent and determ ined them without affording parties the right to be heard and fin ally wrongly concluded the new issues to the detrim ent o f the Appellant; with the effect that the Appellant was condemned unheard. 4. The learned tria l Judge erred in law and fact by reaching to a conclusion that it was not in dispute that the 2nd Respondent was the sole signatory contrary to what was pleaded In the Respondents'jo in t written statem ent o f defence and the p lain tiff's reply to the written statem ent o f defence. 5. The learned tria l Judge erred in law and fact by reaching to a conclusion that the Appellant was required to ca ll the 2nd Respondent to confirm paym ent where there were neither facts pleaded, nor evidence led to that effect as w ell as contrary to the specific agreem ent between the parties. 6. The learned tria l Judge erred in law by giving fu ll weight on a witness statem ent o f a witness who d id not appear for cross examination contrary to the mandatory requirem ent o f Rule 56 (3) o f the High Court Commercial Division Procedure Rules, 2012 as amended. 7. The learned tria l Judge erred in law by personally discrediting/contradicting an expert opinion (forensic examination report, Exhibit P13). In that regard the learned Judge erred in failing to note that an expert opinion could only be contradicted by another expert opinion. 8. The learned tria l Judge erred in law by reading into section 59 (2) o f the Crim inal Procedure Act, Cap. 20 R .E 2019 a requirem ent to 10 only take live sam ples from an individual contrary to rules o f statutory interpretation. 9. In the alternative and without prejudice to ground 8 above, the learned tria l Judge erred in law and fact by blindly relying on Exhibit D ll without analysing the findings. 10. In the alternative and without prejudice to ground 9 above, the tria l Judge erred in law and fact by concluding that the Appellant was in breach o f the term s o f the loan fa cility in absence o f a term in the facility providing for a manner in which funds subject o f the loan should have been disbursed. 11. The tria l Judge erred in law by finding and holding that negligence and fraud was proved by the Respondents to the required standard; consequently, erred in law by holding the whole transaction void and no successful claim could stand under the circum stances by virtue o f sections 23 and 24 o f the Law o f Contract A ct [Cap. 3 4 5 R.E. 2019]. 12. In the alternative and without prejudice to ground 11, the learned tria l Judge erred in law by finding that the loan transaction was void under sections 23 and 24 o f the Law o f Contract Act, Cap. 345 R.E. 2019, where there was neither facts pleaded to that effect nor evidence led in support. 13. The learned tria l Judge erred in law and fact by dism issing the Appellant's case in its entirety while there was evidence on record ii that funds were disbursed to the 1st Defendant, who adm itted utilization o f USD 1,125,861.12 and there was no evidence Zed to confirm fu ii repaym ent o f the utilized am ount 14. The learned tria l Judge erred in law in making findings on extraneous matters. 15. The learned tria l Judge erred in arriving a t a judgm ent which is not supported by the case pleaded and the evidence on record. 16. The court erred in law by proceeding with tria l o f the su it before exhausting the com pulsory m ediation process as required by law. 17. The learned tria l Judge erred in fact by failing to comprehend m ost o f the facts; the evidence and the law governing the party's relationship as a result the learned Judge wrongly analysed the facts, m isapplied the evidence tendered and fin ally arriving a t wrong findings and conclusions. 18. The learned tria l Judge erred in law and fact by adm itting and giving fu ll weight on pieces o f evidence and exhibits on forensic investigation report tendered by the Respondents while the same were legally beyond the scope o f application perm itted by law. 19. The learned tria l Judge erred in law by delivering a judgm ent containing inconsistencies and contradictions. 20. The learned tra il Judge erred in law by acting contrary to the m andatory requirem ents o f the law s by adm itting and giving fu ll weight the testim ony o f Di/I/4. 21. The learned tria l Judge erred in law by adopting the witness statem ent o f M athias Manga from Comm ercial Case No. 104 o f 2017 in Com m ercial Case No. 109 o f 2016. 12 22. The learned tria l Judge erred in iaw by granting costs to the two advocates fo r the Defendants now Respondents contrary to the requirem ents o f the law. When the appeal was called on for hearing before us, the appellant was represented by a team of four learned counsel namely; Messrs Kalolo Bundala, Gasper Nyika, Makarious Tairo and Ribent Rwazo. On the other hand, the respondents had the services of Messrs Mpaya Kamara, Deusdedith Duncan and Emmanuel Saghan, all learned counsel. Pursuant to rule 106 (1) and (7) of the Tanzania Court of Appeal Rules, 2009 (the Rules), the counsel for the parties had earlier filed their respective written submissions for and against the appeal which were duly adopted by the counsel at the hearing of the appeal. Given the course we propose to take in the determination of the appeal, as it will be apparent soon, most of the grounds of appeal will be rendered redundant. For that reason, the submissions made for and against the said grounds of appeal will as well not be considered. We, however, commend the learned counsel for the parties and appreciate that through their respective written submissions, the learned counsel, have thoroughly argued for and against all the grounds of appeal. Their 13 respective submissions have been very helpful to us in the determination of this appeal. Having examined the grounds raised in support of the appeal, we propose to begin with grounds 1 and 16 which are procedural. Thereafter, we will deal with ground 2 and 3 before turning to ground 10 which will be discussed together with ground 17. Lastly, we will determine grounds 12 and 13. It is our considered view that our findings on the above grounds, particularly on grounds 10 and 17 which we find are the crux and decisive grounds of the matter, the reason why the rest of grounds need not be dealt with will be apparent. For the appellant, it was Mr, Nyika, learned counsel, who took the floor to clarify the appellant's written submissions on some of the grounds. Beginning with ground 1 of appeal, it was argued by Mr. Nyika, that, according to the record, the matter which initially was assigned to Mruma, J. was on 29.08.2018, called on for mention before Mwandambo, J. (as he then was). Thereafter, on 18.06.2019 Magoiga, J. took over the matter. In both two instances of succession, it was argued, no reasons for succession were assigned. It was submitted that the failure to assign reasons for the change of trial Judges violated the individual calendar rules introduced by the Chief Justice's Circular No. 3 14 of 1993 (the Circular) which requires that once a matter is assigned to an individual Judge or Magistrate, it must continue before that particular Judge or Magistrate to its final conclusion, unless there are good reasons for doing otherwise. In cementing the argument, our decisions in Fahari Bottlers Limited and Another v. Registrar of Companies and Another [2000] T.L.R. 102, Mirage Lite Limited v. Best Tigra Industries Limited (Civil Appeal No. 78 of 2016) [2019] TZCA 332 (20 September 2019; TanzLII) and Oysterbay Villars Limited v. Kinondoni Municipal Council (Civil Appeal IMo. 173 of 2017) [2018] TZCA 379 (27 March 2018; TanzLII), were cited. It was also insisted that, the violation of the individual calendar system is a serious irregularity which vitiated the proceedings. The Court was thus invited to invoke its revisiona! power under section 4 (2) of the Appellate Jurisdiction Act [Cap. 141 R.E. 2019] (the AJA), quash the proceedings, the judgment and the decree and order retrial. Submitting against the first ground of appeal, it was argued for the respondents that all the Judges who handled the matter before Magoiga J. took over and tried the case to its finality, handled the matter at the preliminary stage before the commencement of the hearing. It was contended that none of said Judges heard and recorded evidence from 15 any witness but it was Magoiga, J. who recorded the evidence from all the witnesses before he composed the judgment. Further, it was submitted that under Order XVIII rule 15 (1) of the Civil Procedure Code [Cap 33 R.E. 2021 (the CPC), the obligation to assign reasons by the succeeding Judge or Magistrate does not apply to cases where the succession is done before the hearing had started. On this argument, reliance was placed on our decision in Ecobank Tanzania Limited v. Future Trading Company Limited (Civil Appeal No. 82 of 2019) [2021] TZCA 368 (3 August 2021; TanzLII). Rejoining, it was argued for the appellant that, the case of Ecobank Tanzania Limited (supra) is distinguishable as in that case the Court did not address or deal with the requirements by the individual calendar system which apply generally in all proceedings but the Court only dealt with the import of Order XVIII rule 15 (1) of the CPC, which is limited to partly heard cases. Our take on ground 1 of appeal, which should, in the first place, ordinarily not detain us, is that the ground is baseless. First of all, as argued for the respondents, the record is clear that, neither Mruma, J. from whom Mwandambo, J, (as he then was) took over the case nor Mwandambo, J (as he then was) from whom Magoiga, J. took over, 16 recorded evidence from any of the witnesses who testified in the case. That being the case, the failure by Mwandambo, J. (as he then was) to assign reason why he had to take over the case from Mruma, J. as well as the failure by Magoiga, J. to do so, when taking over the case from Mwandambo, J. (as he then was), was not fatal and it was not prejudicial to any of the parties. It should also be pointed out that, Order XVIII rule 15 (1) of the CPC and the Circular on Individual Calendar System both require that once a case is assigned to an individual Judge or Magistrate, the said particular Judge or Magistrate should try the case to its final conclusion, unless there are good reasons for not doing so. It is also a common requirement that where there is a succession of trial Judges or Magistrates, mostly in a partly heard case, a successor Judge or Magistrate who takes over a trial from his predecessor is enjoined to assign reasons for the said take over. The rationale behind the requirement is firstly, the fact that the judicial officer who sees and hears a witness testifying is in the best position to assess the credibility of the witness and secondly that, judicial integrity of court proceedings hinges on transparency. See- Charles Chama & 2 Others v. The Reginal 17 Manager, TRA & 3 Others (Civil Appeal No. 224 of 2018) [2019] TZCA 548 (13 May 2019; TanzLII) and Ecobank Tanzania Limited (supra). Further, what the individual calendar system entails, was summarised by the Court in Fahari Bottlers Limited and Another (supra) thus: "...the individual calendar system requires that once a case is assigned to an individualjudge or magistrate, it has to continue before that particular judge or m agistrate to its fin a l conclusion , unless there are good reasons for doing otherwise. The system is m eant not only to facilitate case management by tria l judges and magistrates, but also to promote accountability on their p art." The fact that Order XVIII rule 15 (1) of the CPC and the Individual Calendar System are similar in purpose and object was also observed by the Court in Mirage Lite limited (supra) where it was stated that Order XVIII rule 10 (1) of the CPC (now Order XVIII rule 15 (1)) is not the only applicable provision in dealing with the question of succession of trial Judges or Magistrates but there is also the Chief Justice's Circular No. 03 18 of 1993 on the individual judges/magistrates calendar of cases. The Court observed further that: "In our view, the combined im port o f rule 10 (1) o f Order X V III o f the rules o f the Code as w ell as the individual calendar system is to impose a requirem ent that once the tria l o f a case has begun before a judge or magistrate, that ju d icia l officer has to preside over it to its com pletion unless, fo r some reason to be posted upon record, the judge or m agistrate is prevented from concluding the case". From the above discussion, it is thus clear, as argued for the appellant, that while in Ecobank Tanzania Limited (supra) the Court did not deal with the individual calendar system, the Court expounded the position that failure by a successor Judge or Magistrate to assign reasons for taking over a trial where his predecessor had not heard or recorded evidence from any witness, is generally not fatal as no party can claim to be prejudiced by the said failure. As we have observed above,both Order XVIII rule 15 (1) of the CPC and the individual calendar system save the same object and purpose. 19 Since when Magoiga, J. was taking over the case from Mwandambo, J. (as he then was) and even when Mwandambo, J. (as he then was) took over the case from Mruma, J. the hearing of the case had not started as no witness had testified, the failure to assign reasons for taking over the case by Mwandambo, 3. (as he then was) and Magoiga, 3. was not fatal and it was not prejudicial to any of the parties. That being the case, ground 1 of appeal fails and it is thus dismissed. With regard to ground 16, it was submitted for the appellant that, while rule 33 of the High Court (Commercial Division) Procedure Rules, 2012 (the Commercial Court Rules) provides for compulsory mediation, the trial of the case proceeded without exhausting the mandatory mediation process as required by the law. It was explained that the mediation started on 03.05.2017 before Sahel, 3. (as she then was) when the parties were given time to settle some issues and the matter was adjourned to 16.05.2017 when mediation would continue. However, on 16.05.2017, since the parties had not met to settle the issues and as the period of 14 days for mediation as provided under rule 40 of the Commercial Court Rules, was expiring on 17.05.2017, Sahel, 3 (as she then was) referred the matter to the trial 3udge for necessary orders. On 17.05.2017 when the matter was brought before the trial Judge, instead 20 of extending time for mediation, the trial Judge fixed the matter for Final Pre-Trial Conference and there was no order marking the mediation to have failed. For the respondents, it was simply submitted that ground 16 is baseless because the parties having failed to meet and engage themselves to settle issues between them and the trial Judge having muted on extension of time for mediation and by ordering the matter to proceed by filing witness statements was, by implication, a mark that the mediation had failed. Our finding on ground 16, is that, though there was no express declaration by the Mediator that the mediation had failed as complained by the appellant, the record clearly show that the parties could not amicably reach at the resolution of the dispute within the period of 14 days as required by rule 40 of the Commercial Court Rules. It is also evident on record that even when the matter was referred to the trial Judge by the Mediator and before it proceeded to the next stage, the parties and the appellant in particular, did not press for extension of time for mediation which is a clear indication that no further mediation was worthwhile. The mediation did therefore come to an end by expiration of fourteen (14) days within the meaning of rule 41 (d) of the Commercial 21 Court Rules. It should also be emphasized that mediation period shall not exceed fourteen (14) days from the first session of mediation and further that under rule 38 (1) (a) of the Commercial Court Rules, parties are required to strive to reduce delay in litigation and facilitate early disputes resolutions. For the above reasons and also because the issue is being raised at this stage when the case has already been tried to its finality and, as returning the case to the High Court for completion of mediation process, as suggested by the appellant, will save no meaningful purpose, we find ground 16 baseless and proceed to dismiss it. Next, for our determination are grounds 2 and 3 of appeal which for convenience, we propose to deal with them conjointly. On these two grounds, it is being complained that the learned trial Judge turned the appellant's case for recovery of outstanding loan amount into a case for breach of a banker/customer relationship or the case for management and operation of the 1st respondent's bank account and also that in the course of composing the judgment, the learned trial Judge suo mottu framed new issues and determined them without having accorded the appellant an opportunity to be heard. It was submitted in support of grounds 2 and 3 that, while the appellant's case was for the breach of the Term Loan Facility, the 22 respondents raised, in their joint written statement of defence, matters beyond the said Term Loan Facility. It was argued that matters relating to operation and management of the 1st respondent's bank accounts which fall under banker/customer relationship were new, not within the Term Loan Facility and beyond what was pleaded in the plaint. Mr. Nyika further submitted that once the appellant deposited the loan amount into the 1st respondent's account, all transactions relating to dealing with such deposited money were dealt with in accordance with the contractual relationship between the banker and customer and not in accordance with lender/borrower relationship. It was also submitted that, contrary to the 1st issue, as it was framed and recorded on whether either of the parties breached the terms of the Term Loan facility, the trial Judge focused and broadened the scope of the issue by framing new issues on whether the appellant negligently and fraudulently managed and operated the 1st respondent's bank accounts by allowing transactions without proper instructions and mandate of the 1st respondent and by allowing unauthorized payments from the accounts, issues which were on matters beyond the Term Loan Facility. It was insisted that the trial Judge ought to have confined 23 himself within the scope of the framed issue on whether either of the parties was in breach of the Term Loan Facility. It was further argued for the appellant that, in the course of composing the judgment, the trial Judge framed three new issues regarding the alleged appellant's negligent and fraudulent operation and management of the 1st respondent's bank accounts and that since the said three issues had earlier been proposed by the parties but were rejected by the trial court then, in framing and bringing them back, the High Court became functus officio. On this, the case of Scolastica Benedict v. Martin Benedict [1993] T.L.R. 1, was cited. It was also complained that the said three issues were determined without affording the parties the right to be heard in violation of the cardinal rules of natural justice and Article 13 (6) (a) of the Constitution of the United Republic of Tanzania of 1977 (as amended). To concretize this point, the Court was referred to Charles Christopher Humphrey Kombe v. Kinondoni Municipal Council (Civil Appeal No. 81 of 2017) [2020] TZCA 295 (9 June 2020; TanzLII) and Hood Transport Company Limited v. East African Development Bank (Civil Appeal No. 262 of 2019) [2022] TZCA 283 (21 June 2022; TanzLII). It was finally argued in support of grounds 2 and 3 that, since a new case and new issues were raised and determined without according the appellant a full right to be heard, the decision of the High Court was tainted with serious miscarriage of justice hence, invalid. The Court was thus, urged to allow the appeal and grant all the reliefs sought. Submitting against grounds 2 and 3 of appeal, it was argued by Mr. Kamara that, it cannot be complained that the High Court turned the appellant's case for recovery of outstanding loan amount into a case for breach of a banker/customer relationship. It was contended that there was no way the Term Loan Facility could be executed and performed in the absence of the banker/customer relationship and further that the loan recovery could not be claimed without considering how the loan account was managed and operated. It was further submitted for the respondents that, the respondents rightly raised the defence regarding mismanagement and fraudulent operation of the 1st respondent's bank accounts and that what is pleaded in the plaint does not necessarily determine the defence to be raised. It was pointed out that, in the instant case there was no dispute on disbursement of the loan amount but bearing in mind that the relevant 25 account was being managed by the appellant, the dispute was on the extent the said loam amount was utilised. Mr. Kamara submitted further that, no new issues were framed by the High Court. He pointed out that, apart from the fact that the first three issues were framed and recorded by the trial court at the instance of both parties from their respective proposed issues, the three minor issues raised by the High Court in the course of composing the judgment came from and were based on the first main issue. It was insisted that the said three issues were only meant to answer the first main issue and not otherwise because there was no way breach of the Term Loan Facility could be ascertained without considering matters raised in the three minor issues. Citing the case of Stella Temu v. Tanzania Revenue Authority (Civil Appeal No. 72 of 2004) [2004] TZCA 55 (27 October 2004; TanzLII), it was argued that the appellant cannot be heard complaining that it was not afforded the right to be heard because both parties had an opportunity and in fact, they both led evidence on the said alleged three minor issues. It was also argued for the respondents that, the issues proposed by the parties were not rejected as argued for the appellant but that the same were incorporated in the three main issues recorded by the High 26 Court. For this reason and under these circumstances, it was argued that the issue of the High Court becoming functus officio does not arise. On grounds 2 and 3 of appeal, we are firstly in agreement with Mr. Kamara for the respondents that, based on the pleadings and particularly on the kind of defence raised by the respondents, it cannot be complained that in determining the suit, the High Court turned the appellant's case for recovery of the outstanding loan amount into the case raised by the respondents. In determining whether the appellant was negligent and fraudulent in the management and operation of the 1st respondent's accounts and also in ascertaining whether the appellant fraudulently allowed unauthorized withdrawals from the 1st respondent's accounts, the High Court was dealing with the first issue on who between the parties was in breach of the Term Loan Facility. It should be borne in mind that, the first issue, as framed and recorded by the High Court, did not come out of the blue. The issue came from the pleadings. The issue arose from the respondents' defence in which the respondents denied to have breached the Term Loan Facility contending that it was the appellant who had breached the Loan Facility first, not only by negligently and recklessly managing the 1st respondent's loan 27 account but also by allowing fraudulent withdrawals from the said account without the 1st respondent's authorization. As we have alluded to above, we thus, agree with Mr. Kamara that, under the circumstances of this case, the High Court did not turn the appellant's case for recovery of the outstanding loan amount into a case for breach of a banker/customer relationship and or management and operation of the 1st respondent's account raised by the 1st respondent. Of course, we note that the appellant's case was not at all considered by the High Court, however, from the way the first issue was framed and the High Court having decided to begin with the first limb of the issue on the determination of whether it was the appellant who was in breach of the Term Loan Facility, and having been found that it was the appellant who had breached the Term Loan Facility first and that the whole transaction was void, there is no way the High Court could have gone back to the second limb of the first issue on determining whether the respondents were in breach of the said Term Loan Facility or not. The above, does not, however, mean that we are in agreement with the outcome of the determination of the first main issue by the High Court. The crucial question, to our considered view, on which the High Court ought to have focused, as we have earlier alluded to, was whether 28 matters of management and operation of the 1st respondent's accounts were among the terms of the Term Loan Facility. This question will be dealt with in the preceding grounds of appeal. Regarding the complaint that the High Court framed new issues in the course of composing its judgment, we again agree with the respondents that given the nature of the defence raised by the respondents and the way the first issue was framed, no new issues were framed. The alleged new issues were minor issues derived from the first main issue on who between the parties was in breach of the Term Loan Facility. The said three issues regarding the alleged appellant's negligent and fraudulent operation and management of the 1st respondent's bank accounts were framed in the course of composing the judgment in answering the first main issue on whether either of the parties was in breach of the Term Loan Facility. At page 108 of the supplementary record of appeal or page 72 of the judgment, the High Court began its deliberation by stating that: "I w ill start with the determ ination whether the p la in tiff in management and operation o f the 1st defendant's accounts did so negligently and fraudulently as such allow ed transactions without 29 proper instructions and mandate o f the 1st defendantf. Having discussed at length issues of negligence and fraud, the High Court concluded at page 120 of the supplementary record of appeal or page 84 of the judgment thus: "Relying on reasons I gave when dealing with the allegations of negligence and fraudulent withdrawals herein above and having gone through the testim ony o f the parties and having read the exhibits tendered, I with respect to the learned advocate for the plaintiff, inclined to associate m yself with the defendants' counsel that it is the p la in tiff who breached the term s o f the loan facility agreem ent and contract o f guarantee and indem nity by failing to discharge her duties and obligations under the agreem ent” Since the High Court did not turn the appellant's case for recovery of the outstanding loan amount into the respondents' case raised in their defence and as the High Court did not frame new issues in the course of composing its judgment, as we have endeavoured to demonstrate above, the complaint that the appellant was not afforded the right to be 30 heard becomes baseless and misconceived. From the very beginning, after the respondents had filed their joint written statement of defence denying the allegations levelled against them and raising the defence that it was the appellant who had breached the Term Loan Facility by negligently and fraudulently managing the 1st respondent's accounts and after the High Court had framed and recorded the first main issue on who between the parties was in breach of the Term Loan Facility, each of the parties knew, beforehand, that evidence will be required to prove and disprove the allegations of negligence and fraud as raised by the respondents. The appellant can thus, not be heard complaining that the right to be heard was not afforded to it. In fact, the appellant led evidence disproving that it was negligent and fraudulent in managing and operating the 1st respondent's accounts. In the same breath, the complaint that the High Court became functus officio when it raised the alleged new issues in the course of composing its judgment, is also baseless. As submitted by Mr. Kamara for the respondents, the issues proposed by the parties regarding the alleged negligence and fraud on part of the appellant were not rejected by the High Court but were incorporated in the three issues and particularly in the first main issue, as framed and recorded by the High Court. 31 For the foregoing reasons and observations grounds 2 and 3 are dismissed for being baseless. Let us now turn on grounds 10 and 17 whereby it is complained by the appellant firstly that, the High Court erred in finding and concluding that the appellant was in breach of the terms of the Term Loan Facility in the absence of any term in the said Term Loan Facility providing the manner in which the 1st respondent's loan account was to be managed and operated and secondly that, the High Court failed to comprehend most of the facts, evidence and the law governing the parties7 relationship leading to a wrong analysis of evidence and to erroneous findings. On the above grounds, it was submitted for the appellants that, the relationship between the parties was governed by the Term Loan Facility Agreement (Exhibit P2), which stipulated the terms, obligations and rights of the parties but in which there was no term regarding how the disbursed loan amount was to be managed. It was contended that in the absence of a specific term on how the loan account was to be managed and operated, there was no basis for the High Court to hold that the appellant was in breach of the Term Loan Facility Agreement by 32 mismanaging the 1st respondent's loan account and also by fraudulently allowing unauthorized withdrawals from the account. It was further submitted for the appellant that, the High Court was legally bound to determine the suit and the first issue within the limit of the three framed issues based on the Term Loan Facility Agreement. It was also argued that the High Court ignored the evidence led by the appellant which was to the effect that the allegations on negligence and fraud by the respondents were mere afterthoughts raised after the issuance of a demand notice by the appellant and after the institution of the suit. Responding to grounds 10 and 17 of appeal, it was submitted for the respondents that in determining whether the appellant was in breach of the terms of the Term Loan Facility, reliance should not only be placed on the Term Loan Facility (Exhibit P2) but also on Article 1 of Exhibit P6b under which the manner the 1st respondent's loan account was to be managed and operated and also on the mode of effecting the banking transactions in event there is no any agreement to that respect, was clearly stipulated. It was contended that none of the transaction in the 1st respondent's loan account was done by cheques as required and further that neither of the appellant's staff took trouble to verify the 33 withdrawals from the 1st respondent's account before allowing the fraudulent withdrawals. Relying on the Nigerian case of Babalola v. Union Bank of Nigeria Limited [1980] (1) ALR Commercial, 201, it was argued that a reasonable banker will be in a breach of duty if he continues to pay cheques without enquiry. In determining grounds 10 and 17, we should begin by pointing out that after the respondents have raised the defence that it was the appellant who had breached the Term Loan Facility by negligently and fraudulently managing and operating the 1st respondent's loan account; and after the first issue on who between the parties was in breach of the Term Laon Facility had been framed and recorded; and further, after the High Court had decided to begin with the determination of whether it was the appellant who was in breach, the High Court was supposed, in determining the said first limb of the first issue, to firstly determine whether the Term Loan Facility constituted a term requiring the appellant to manage and operate the 1st respondent's loan account. As correctly argued for the appellant, the determination of the issue whether either of the party was in breach of the terms of the Term Laon Facility ought to have been confined within the four corners of the Laon Facility. Based on the nature of the defence raised by the respondents 34 and the way the 1st issue was framed, the High Court ought not to have jumped into the determination of whether the appellant was negligent or had fraudulently managed the 1st respondent's account and allowed unauthorised withdrawals from the account, without having first satisfied itself if the alleged obligation on how the 1st respondent's account was to be managed and operated, was one of the terms of the Term Loan Facility. We emphasize that since the subject of the alleged breach was the Term Loan Facility, there was no way the appellant could be found to have breached the Term Loan Facility if the alleged the Term Loan Facility constituted no term placing obligation on the appellant to manage and operate the 1st respondent's account. As we have alluded to above, in determining the 1st issue on who between the parties was in breach of the Term Loan Facility, the crucial question the High Court ought to have answered first, was thus, whether there was a term in the Term Loan Facility for the appellant to manage the operation of the 1st respondent's loan account. In its judgement, the High Court, rightly so to our opinion, directed its mind to the position of the law that a breach of contract occurs when one party to the contract fails to perform the contract according to the terms of the contract. According to section 37 (1) of the Law of Contract Act [Cap. 345 R.E. 35 2019] (the Law of Contract), the parties to a contract are legally obliged to perform their respective promises. Again, at page 85 of its judgement, the High Court, having directed its mind to the position of the law as above stated, rightly posed the following question: "Guided by the above fegai stance, the next question to be asked by this court is was there any such failure on the part o f the 1st defendant o r p lain tiff? In o rd e r to fin d o u t w h e th e r th e re w a s b re a ch o f fa ilu re to p e rfo rm ; o n e s h o u ld ta k e in to co n sid e ra tio n th e te rm s o f th e c o n tra c t a n d fin d o u t i f a t a ll, th e re w as a n y fa ilu re to f u lf il a n y su ch te rm s w ith o u t a n y ju s tifia b le o r la w fu l ca u se " [Emphasis added] To our considered view, up to the above demonstrated point, the High Court was on the right track. All what was needed to be done by the High Court was to revisit the Term Loan Facility and find out if it contained a term obliging the appellant to manage and operate the 1st respondent's account. Unfortunately, having posed the above question, the High Court never went into examining the Term Laon Facility to find 36 out if, in it, there was any term requiring the appellant to manage and operate the 1st respondent's loan account. Instead, the High Court jumped into the determination of the issue whether the appellant negligently and fraudulently managed and operated the 1st respondent's account and ended up deciding it in the affirmative, in that it was the appellant who had breached the terms of the Laon Facility by failing to discharge her duties and obligations under the agreement. To our considered view, it was at this point where the High Court went astray. On our part, having examined the Term Loan Facility, we agree with the appellant's counsel that the High Court erred in concluding that the appellant was in breach of the Term Laon Facility. As submitted for the appellant, there was no term in the said Term Loan Facility placing obligation or duty on the appellant on how to manage the operation of the 1st respondent's loan account. In his attempt to convince us that there was such a binding term in the Term Loan Facility, for the appellant to properly manage the 1st respondent's loan account, Mr. Kamara referred us to Article 1 of the Credit Facility Agreement (Exhibit P6b) which is to the following effect: "Art. 1, -Credit facilities may be taken up as specified o r to be specified in the correspondence 37 between the Bank and Borrower, and in the absence o f any such specification , by means o f any banking transactions effected byf or on behalf the Borrower, particularly in the form o f advances o f funds on negotiable instrum ents (b ills o f exchange, cheques, prom issory notes, warrants invoices, etc), letters of credit, guarantees or sureties given by the Bank on the Borrow er's behalf, opening o f documentary credits, etc" With due respect to Mr. Kamara, it is our considered view that, looking at the above reproduced clause, it cannot be said that the same provides for the manner the loan account was to be managed and operated or that it places any obligation on the appellant to manage the operation of the 1st respondent's account. As rightly argued by Mr. Nyika, Article 1 of the Credit Facility Agreement does not, provide for the manner the operation of the appellant 1st respondent's loan account was to be managed or place any obligation upon the appellant relating to operation and management of the 1st respondent's account. The clause provides for the manner and means the credit facilities ought to be taken up. As we have alluded to earlier, it is thus our finding that, the 38 operation or management of the 1st respondent's account was not among the terms of the Term Loan Facility and the High Court did therefore, in the absence of such a term, err in finding that the appellant was in breach of terms of the Term Laon Facility agreement. At this juncture we should also agree with the stance by Mr. Nyika for the appellant that the relationship between the parties created by the Term Laon Facility was that of the lender and borrower. When a loan from a banker is negotiated and granted to a borrower on certain agreed conditions and terms and finally, when the agreed loan amount is disbursed or deposited in the borrower's account, the contractual relationship between the parties change from lender/borrower relationship to banker/customer relationship. Matters relating to operation and management of the bank account into which the loan amount is deposited and its withdrawals and utilization do not fall within the ambit of lender/borrower relationship but within the ambit of banker/customer relationship. It is for that reason that, in the instant case, terms on how the 1st respondent's account was to be managed and operated could not be expected to be contained in the Term Laon Facility. 39 Since there was no term in the Term Loan Facility placing obligation to the appellant to manage the 1st respondent's account as above observed, the High Court did therefore err in finding that the appellant was in breach of terms of the Term Loan Facility by being negligent and by allowing fraudulent withdrawals of the 1st respondent's money from its account and by making payment to third parties and non-existing persons without the 1st respondent's mandate. The Term Laon Facility contained no such term and the appellant cannot be found in breach of a non-existent term of the Term Laon Facility. All in all, because the Term Loan Facility had no term placing obligation to the appellant to manage the 1st respondent's account as above discussed and as the High Court erred in finding the appellant in breach of the Term Loan Facility by allegedly being negligent and by allowing fraudulent withdrawals from the 1st respondent's loan account, we quash and set aside all the findings by the High Court relating to the said alleged appellant's negligence and fraud. The High Court reached at the findings on the alleged appellant's negligence and fraud on the basis of wrong premises. Next for our consideration is ground 12 of appeal where it is being complained that the High Court erred in finding and declaring the whole 40 loan transaction void. It was submitted in support of this ground that because there were no facts pleaded by the respondents that the loan facility was void it was wrong for the High Court to declare the transaction as such. It was further insisted that there was no way the High Court could make such a finding under sections 23 and 24 of the Law of Contract in the absence of clear and specific facts pleaded. Further submissions in support of ground 12 was that the Term Loan Facility was executed by competent parties with free consent for lawful consideration and with lawful object as it is required by section 10 of the Contract Act. For the respondents, it was submitted that following the appellant's negligence in allowing fraudulent withdrawals from the 1st respondent's accounts, fraud was committed rendering the entire transaction illegal and thus void. It was contended that since the consideration and object of the Term Loan Facility agreement were tainted by fraud then the High Court did not err in declaring the transaction void under sections 23 and 24 of the Contract Act. Relying on the cases of Elliahoo Mansoor Cohen v. Syed AM Abdulla El-Said and Bros (1956) EACA 161 and Suleiman Bin Abdulla Bin Mohamed El Kiyini v. Azzan Bin Zahor El Ruwehi and Another [1953] EA 554, it was submitted for the 41 respondents that all the facts pertaining to the unlawfulness of the Term Loan Facility agreement was pleaded and well established by evidence. Based on what we have just found on grounds 10 and 17 of the appeal, the determination of ground 12 of appeal becomes easier. The High Court's conclusion and declaration that the whole transaction was void and also that under the said circumstances no successful claim could stand, was based on the finding that negligence and fraud had been proved against the appellant, (see page 86 of the judgment). The finding by the High Court on the appellant's alleged negligence and fraud having been quashed and set aside by the Court, the declaration that the whole transaction was void lacks grounds on which to stand. We should have ended here on ground 12 but for the sake of completeness, we also find that the transaction of the relevant Term Loan Facility was not void. According to section 24 of the Contract Act, a contract is void where any part of a single consideration for one or more objects, or any one or any part of any one of several consideration for a single object, is unlawful. Further, under section 23 (1) of the Contract Act, it is provided that: 42 "23. -(1) The consideration or object o f an agreem ent is iawful, unless - (a) it is forbidden by law; (b) it is o f such a nature that, if perm itted, it would defeat the provisions o f any taw; (c) it is fraudulent; (d) it involves or im plies injury to the person or property o f another; or (e) the court regards it as im m oral or opposed to public policy Subjecting the relevant Term Laon Facility to the above parameters of the law, there is no way it can be said that any part of the consideration or object of the Term Loan Facility was forbidden by the law, fraudulent, involved or implied injury to any person or property or that if permitted would have defeated any provision of any law or that it was immoral or against any public policy. The High Court did thus err in declaring the whole Term Loan Facility transaction void and the declaration is thus accordingly hereby quashed and set aside. Having determined grounds 10, 12 and 17 of appeal in favour of the appellant that no term of the Term Loan Facility was breached by the 43 appellant and also that the Term Laon Facility transaction was not void, we find now tasked with determining the second limb of the first issue, which, as we have alluded to earlier, was not determined by the High Court. This, is on whether the respondents were the ones who breached the Term Loan Facility. This issue, besides being the crux of the appellant's case before the High Court, it also forms the basis of ground 13 of the appeal which is to the effect that the High Court erred in dismissing the appellant's case in its entirety. The appellant's submission on ground 13 of the appeal was to the effect that it was an error on part of the High Court to have dismissed the appellant's case while there was no denial by the respondents that there was a default in repaying the loan amount. It was further argued that besides the respondents' claim that the appellant did negligently and fraudulently allow part of the loan amount to be withdrawn without the mandate of the 1st respondent, still there was an admission by the respondents under paragraph 4.2 of their joint written statement of defence that the 1st respondent had withdrawn and utilized USD. 1,125,861.12 which had not been repaid. 44 Responding to the appellant's submission on ground 13, it was simply argued for the respondent that the appellant's case was rightly dismissed in its entirety because it was based on the void transaction. According to the Term Loan Facility dated 11.07.2012 (Exhibit P2) and in particular under Clause 9 of the said Term Loan Facility, repayment of the loan was to be made in 36 equal monthly instalments after a moratorium period of 12 months. Further, under paragraphs 9 and 10 of the plaint, it was the appellant's case that in breach of the Term Loan Facility, the respondents had failed to repay the loan amount within the agreed period of time and also that as of 30.07.2016, the outstanding loan amount was USD. 2,878,100.00. in response to what was pleaded by the appellant under paragraphs 9 and 10 of the plaint, the respondents, under paragraphs 9, 10, 11, 12, 13, 14 and 15 of their joint written statement of defence, did not specifically deny to have failed to repay the loan amount. In justification of their failure to repay the loan amount, the respondents blamed the appellant for having negligently and fraudulently allowed unauthorized withdrawals from the 1st respondent's loan account. It was insisted that had it not been for the appellant's alleged negligence and fraud, the respondents would not have failed to repay the loan amount. As on the outstanding amount, the 45 claimed amount of USD. 2,878,100.00 was disputed. It was stated by the respondents that the outstanding amount ought to have been the loan amount less USD 1,435,757.25, that is, the amount the respondents admitted to have withdrawn and utilized by the 1st respondent. From the above pleadings regarding whether the respondents were in breach of the Term Laon Facility or not and in consideration of the nature of the defence raised by the respondents as abundantly discussed above, it is clear that the respondents had failed to repay the loan within the agreed period of time hence in breach of the Term Loan Facility. It is also our considered view that, given the circumstances of the instant case, the respondents' defence that the appellant had negligently and fraudulently managed the 1st respondent's account, even if proved, could not have exonerated them from being condemned to have failed to service the loan hence, liable for the breach of the Term Loan Facility. Also worth noting is the fact that non-payment of loans does not only amount to breach of contract between lenders and borrowers but it is against public policy that require loans to be repaid timely. Thus, our conclusion with regard to ground 13 is that the respondents were in breach of the Term Loan Facility. 46 With regard to what was the outstanding loan amount, we have examined the evidence on record and we are satisfied that the outstanding loan amount was as claimed by the appellant. Besides other pieces of evidence relevant to that issue, there is a letter from the 1st respondent dated 14.07.2016 to the appellant, which was admitted in evidence as exhibit P8 b, through which the 1st respondent acknowledged that by that time, the outstanding loan amount was USD. 2,865,761.97 as it was being claimed by the appellant. By that letter, the 1st respondent, among other things, did also ask for an additional amount of USD. 300,000.00 to top up the loan amount, the restructuring of the repayment period to be seven (7) years and waiver of all the accumulated penal interest. The 1st respondent's request was partly granted by the appellant. By its letter dated 18.07.2016 (Exhibit P8 c), the appellant agreed to restructure the tenure of the Term Loan Facility by which the loan amount would be payable within seven (7) years. Additional exposure of USD, 300,000.00, reduction of interest rate, waiver of penal interest and reduction of fees as requested by the 1st respondent, were refused by the appellant. The outstanding loan amount, as of 30.07.2016, was thus, USD. 2,878,100.00. 47 The above said and done and having determined grounds 1, 2, 3, 10, 12, 13, 16 and 17 of appeal in the foregoing manner, we find no necessity of considering other remaining grounds which have been rendered redundant and obsolete. The High Court judgement and decree are quashed and set aside. The appeal is allowed with costs and all the prayers in the plaint are granted to the appellant. DATED at DAR ES SALAAM this 30th day of July, 2024. R. K. MKUYE JUSTICE OF APPEAL A. M. MWAMPASHI JUSTICE OF APPEAL Z. G. MURUKE JUSTICE OF APPEAL The Judgment delivered on this 31st day of July, 2024 in the presence of Mr. Libent Rwazo, learned counsel for the Appellant also holding brief for Mr. Mpaya Kamara and Deusdedith Duncan, learned counsels for the Respondent, is hereby certified as a true copy of the original. J. J. KAMALA DEPUTY REGISTRAR COURT OF APPEAL 48